The debt of 850 million euros is the largest in the history of Montenegro so far, and we will pay additional interest of around 290 million euros on it, which means that we will repay a total of around 1,1 billion euros.
This was pointed out to "Vijesti" by the economic analyst and director of "Fidelity consulting". Miloš Vuković.
Prime Minister's Government Milojko Spajić yesterday issued government bonds on the London Stock Exchange in a total amount of 850 million euros at an interest rate, as stated by the Ministry of Finance, of 4,875% and with a maturity of seven years.
The Ministry of Finance said that yesterday it was also shown that investors have great confidence in Montenegro and that they have managed to secure money on the international market under the most favorable possible conditions, so that the state can repay old loans of over 800 million euros, which are due to this Government by the end of 2025.
"The Ministry of Finance has successfully issued government bonds in the amount of 850 million euros, with a maturity of seven years, at an interest rate of 4,875%, which is lower than some of the interest rates provided by countries in the investment credit rating range and full members of the European Union under current market conditions. Today's borrowing price is almost a full percentage point more competitive than last year's borrowing, which recognizes the progress that the 44th Government has made, which was recognized, among other things, by rating agencies that increased the credit rating in the middle of last year," said the Ministry of Finance, headed by the Minister Novica Vuković.
The largest debt principal repayments in 2025 are debt based on government bonds issued in 2018, EUR 500 million, World Bank loans (PBG1 and PBG2) from 2018 and 2020, EUR 55 million, debt to Deutsche Bank based on borrowings from 2023, EUR 40 million, debt repayment to the Chinese Exim Bank for the first section of the Bar - Boljari highway, EUR 60 million, repayment of loan installments taken from domestic commercial banks, EUR 57 million, and repayment of loan installments based on arrangements with the IMF, budget support due to COVID19 from 2020, EUR 20 million.
Last year, the government issued bonds worth 680 million at an interest rate of 5,88 percent.
Worried about the due date
Vuković said that the Government issued government bonds at an interest rate of, according to the Ministry of Finance, 4,875%, which is significantly higher than previous issues, despite announcements of a large investment boom and the confidence of international markets.
"For comparison, in 2018, Montenegro issued bonds at a significantly more favorable interest rate of 3,375%. This means that the state has now taken on new debt under significantly more unfavorable conditions - exactly 1,5 percentage points more expensive. Behind that figure lies a concrete financial burden: annually, this represents an additional 12,750 million euros that we will pay only in interest. When multiplied by a seven-year term, the total interest cost is as much as around 90 million euros more than it would have been if the conditions from 2018 were still valid," Vuković emphasized.
According to him, it is even more devastating that the new interest rate is two percentage points higher than the 2020 rate.
"At that time, Montenegro, despite the pandemic, managed to borrow on somewhat better terms. Today, in conditions when the government is publicly boasting about alleged record investments and economic and fiscal "revival", the markets clearly do not share the same enthusiasm. Of particular concern is the fact that the maturity (time period for maturity) was maintained at seven years - which means that investors were not ready to invest in longer bonds that imply greater confidence in the long-term stability of the state. In other words, international investors remain skeptical about the government's fiscal policy and the sustainability of public finances in the future, especially with the existing spending model," Vuković said.
He assessed that all this casts a shadow over the optimistic statements of Prime Minister Milojko Spajić, who has been announcing an infrastructure investment cycle of eight billion euros by the end of 2030 for months, for which there are no concrete results. "In addition, investors have clearly remained cool to the announcement of an investment in Ulcinj in the amount of as much as 30 billion euros, which is an amount that exceeds the annual GDP of Montenegro almost four times. Investors have clearly perceived the current and future risks that the Government's economic policy has produced through the violation of the Law on Budget and Fiscal Responsibility, as well as the spending limits defined by the Macroeconomic and Fiscal Policy Guidelines. Of course, financing capital projects at an interest rate of 5,125% does not instill confidence that they will be economically profitable," said Vuković.
They are repaying previous debts of 820 million
The Ministry of Finance stated that they are not borrowing for current spending, but solely to finance obligations that were not created during the mandate of this ministry and the Government, thus protecting the fiscal stability of the state and the budget of all citizens.
"In addition, we finance all regular budget obligations such as salaries, pensions and social benefits from current revenues, and we have additionally increased salaries and pensions - without borrowing. The entire procedure was carried out in accordance with the law and international standards and allows us to regularly settle the state's obligations from the past, primarily the repayment of previous debts that are due this year in the total amount of 820 million euros, of which the largest part of 500 million from the 2018 bond issue," the Ministry of Finance said.
The issuance of government bonds not only enables, as the Ministry of Finance says, responsible management of public debt, but also clearly shows that the global financial sector recognizes Montenegro as a reliable partner and an attractive investment destination.
"The strong demand for Montenegrin bonds, along with record investor interest in the euro market, confirms that international financial markets have recognized the stability of our fiscal policy, economic prospects and long-term sustainability of Montenegrin public finances. With this strategic move, we are further strengthening the stability of public finances, ensuring financial responsibility and confirming the confidence of global investors in the economic potential of Montenegro. We continue to pursue a responsible and transparent debt management policy, preserving budget stability and the financial position of all citizens of Montenegro," the Ministry of Finance said.
The issue was carried out in accordance with the Budget Law and the Decision on Borrowing for 2025, adopted by the Parliament, according to which the state can borrow up to 1,4 billion euros to refinance liabilities, capital investments, and fiscal reserves.
"Based on detailed market analyses, conducted in cooperation with renowned international financial institutions, it was assessed that current market conditions were extremely favorable. Investor interest was three times higher than the planned issue amount," the Ministry of Finance said.
Investors have also factored risks into the price
Miloš Vuković's assessment is that the market is obviously reacting to specific risks and weaknesses of the administration, not to political rhetoric.
"Investors have factored into the price of the new bonds the additional risks that Montenegro carries, including the dollar bond issued last year, as well as the arrangement for the construction of a highway, for which hedging was concluded to mitigate currency risks. However, if the dollar weakens against the euro (at the agreed EUR/USD exchange rate), Montenegro will suffer a direct financial loss on this hedging arrangement," Vuković stressed.
According to him, ultimately, numbers speak louder than words - Montenegro is currently paying more expensive debt, with less market confidence and greater uncertainty regarding future fiscal sustainability.
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