Cash-Strapped Montenegro Borrows Biggest Loan in Decades

PM Zdravko Krivokapic with ministers after the government session in Podgorica. Photo: Government of Montenegro

On Wednesday, the Ministry of Finance and Social Care clarified that the country took the loan from BofA Securities, Citigroup, Erste and the Société General group, adding that it will be repaid over seven years at 2.95 per cent interest.

Minister Milojko Spajic said it was the only way to keep public finances stable after the country spent major sums dealing with the fallout of the COVID pandemic.

"Montenegro has an economic future today. Massive layoffs, reductions in salaries and pensions and other scenarios that were envisaged for the new government were avoided in the best way," Spajic told the media. "Money has been provided to repay unfavourable old loans and invest in our growth and recovery," he added.

But the new loan will increase Montenegrin public debt, which was equal to 65 per cent of GDP, at the end of last year. On September 24, Montenegro's Statistical Office said GDP fell by 20.2 per cent in June, and the country could end 2020 with a public debt of around 90 per cent of GDP.

On October 14, the IMF warned that Montenegro in 2020 would face its biggest economic contraction of nearly 12.4 per cent since independence in 2006.

It urged the government to carefully plan public investment, and refrain from undertaking further large capital and infrastructure expenditures until the public debt is lowered.

An opposition Social Democratic Party MP, Rasko Konjevic, accused the new government of Zdravko Krivokapic of continuing the high-spending economic politics of the recently ousted Democratic Party of Socialists, DPS.

"No collection of tax debt … no cutting spending… and I assume that the...