Another 3,5 million provided for water and sewage in the Tivat settlements of Donja Lastva and Gradiošnica

The Government has given the green light for the signing of an agreement between the Ministry of Finance, the Municipality of Tivat and the Joint Service and Coordination Company for Water Supply and Wastewater Disposal for the Montenegrin Coast, "Vodacom" from Tivat, which forwards loan and grant funds to the Municipality for the implementation of the project "Water Supply and Wastewater Disposal on the Adriatic Coast - Phase V, Component 2".

Under the contract, which was approved at the last session of the Government last week, a total of 3,5 million euros will be forwarded to the Municipality of Tivat, of which 2,5 million euros are loan funds from the German development bank KfW, and one million euros are a grant from the Government.

KfW is the main creditor of the complex project of renovation of the existing and construction of a new water supply and sewage network, which has been implemented in several phases in the municipalities of the Montenegrin coast through the Government since 2003.

Tivat has already taken money from KfW bank credit lines on several occasions, with which it has built a new city sewage system, several new parts of the water supply network and a modern wastewater treatment plant in Krtoli.

The local government of Tivat regularly and fully repays the loan installments, some of which have already been fully settled in the meantime. Within the current Phase V-Component 2, the Municipality of Tivat has been transferred funds in the total amount of 2017 million euros under the 11 contract, of which 3,17 million euros have been used so far.

However, as the people of Tivat have yet to begin implementing a large-scale project to build a new and reconstruct the existing water supply and sewage network in the settlements of Donja Lastva and Gradiošnica, for which a contract worth 28 million was signed last year with the selected contractor, the company "Jedinstvo" from Užice, the city needs additional funds from the KfW bank. The work should begin after the end of the current summer tourist season.

Therefore, the Government has approved an additional new Agreement on the transfer of loan and grant funds to the Municipality of Tivat in the total amount of 3,5 million euros, which will be added to the remaining 7,83 million that the people of Tivat still have unspent from the previous loan tranche taken in 2017.

Ten years grace period

Pursuant to the Draft Transfer Agreement, the Ministry of Finance will transfer loan funds to the Municipality of Tivat under the same conditions defined in the Loan Agreement between the Ministry of Finance and KfW, for Phase V-Component 2. In accordance with the Government Conclusions, and taking into account the importance of this infrastructure project, as well as the current indebtedness of the municipalities, a grace period of 10 years has been approved in order to avoid overlapping loans and ensure the financial stability of the local government budget.

The Municipality of Tivat will repay its obligations to the Ministry of Finance over 20 years, including a 10-year grace period. The principal of the loan will be repaid in 20 semi-annual installments, starting on June 30, 2035, with the final repayment date on December 30, 2044.

The interest rate is fixed and amounts to 1,80 percent per annum, and payment is semi-annually, on June 30 and December 30, starting from December 30, 2025. Also, a commitment fee of 0,25 percent per annum is foreseen, which is also calculated and paid semi-annually, starting from December 30, 2025.

The Ministry of Finance noted that, pursuant to Article 49 of the Law on Local Self-Government Financing, a municipality may borrow if the annual repayment of principal and interest does not exceed 10 percent of current revenues generated in the previous year. Above that limit, borrowing is permitted only for financing capital projects of strategic importance, with the consent of the Government.

"Upon reviewing the submitted documentation, it was determined that the total principal and interest repayment of the Municipality of Tivat for 2025 amounts to 2,67 million euros, while the current revenues generated in the previous year, 2024, amounted to 19,32 million euros. Accordingly, the annual principal and interest repayment accounts for 13,80 percent of the total current revenues generated in the previous year, which slightly exceeds the legally prescribed limit of 10 percent. However, taking into account that the Project is of strategic importance, which was confirmed by the relevant ministry in a letter dated 09.06.2025, emphasizing that it is on the List of Priority Infrastructure Projects for the Environment, from December 2021, the Ministry of Finance proposes to the Government that the subject debt of the Municipality of Tivat be approved," states the documentation that accompanied the Government's decision to forward a new loan to Tivat from KfW Bank.

The Ministry of Finance also said that "it is important to emphasize that the Municipality of Tivat is regularly settling its obligations to the state based on two previously approved transfer loans related to the implementation of the Water Supply and Wastewater Treatment Project on the Adriatic Coast - Phase V and Phase V-Component 2", and that the current debt of the City of Tivat to the German bank on this basis amounts to 7,83 million euros.