Montenegrin Highway to Serbia Faces Fresh Funding Doubts

With the first section of the Bar-Boljare highway through Montenegro due to open at the end of 2020, funding for the rest of the Chinese-built road is looking doubtful due to the country's mounting debts and the global economic fallout from the COVID-19 pandemic, analysts warn.

The Bar-Boljare represents the Montenegrin leg of a highway to run from the Montenegrin Adriatic coast to the Serbian capital, Belgrade.

The Montenegrin leg is being built by the Chinese Road and Bridge Corporation, CRBC. The first section is 85 per cent financed by a $944 million loan from China's Exim Bank, with the first annual repayment of $67.5 million due next year.

While boosting economic growth, the project drove up public debt by almost a fifth on the back of the Chinese loan, growing to some 79 per cent of gross domestic product in 2019.

The government says it will complete the project, but analysts are unsure where it will find the money for the other three sections.

"Due to the growth of public debt so far, Montenegro cannot finance further construction with new loans," said economic analyst Zarija Pejovic, noting also the concerns expressed by the World Bank and the IMF.

With economists warning of a coronavirus-induced economic crisis on the scale of the Great Depression, Pejovic said there was "little chance of Montenegro finding someone willing to secure a loan."

Spiralling public debt

Moracica bridge on Montenegrin highway. Photo:Government of Montenegro

In January, Transport Minister Osman Nurkovic announced that the first phase of the highway -from Matesevo to Boljare - would be finished in September and would open later subject to a technical inspection.

According to the contract with CRBC, the first...