BRI Debt Trap in Europe: Montenegro wants EU bailout for Chinese loan
Montenegro has asked the European Union for help with repaying a BRI-related loan to China. In 2014, Montenegro signed a €809 million loan with China’s Exim Bank for the construction of the first stretch of the Bar-Boljare highway. The loan must be fully repaid in 2034 with a 2% fixed interest [Montenegro asks EU for help to repay Chinese motorway loan]. The 169-kilometer highway has been a Montenegrin dream since 2005: connecting the Port of Bar on the Adriatic coast with Serbia, boosting trade, business and jobs. But feasibility studies concluded the plans to be economically unviable and suggested an upgrade to the existing road network would make more sense.
Undaunted, the government of Montenegro decided to go ahead. But talks with companies from various European countries ended up to nothing. Then came another study, by the University of Montenegro and paid by the Exim Bank. This study concluded the highway was viable after all. Construction by the China Road and Bridge Corporation (CRBC) of the first 41-km stretch of the highway began in 2015. This part runs from Smokovac to Matesevo trough difficult and mountainous terrain.
Progress has been slow, and the completion date is scheduled for 2021, a two-year delay. China has offered to finance the rest of the highway as well, but Montenegro hasn’t decided yet. In 2020, the total public debt of Montenegro was €3.83 billion, equivalent to 82% of GDP. The loan from Exim Bank makes up 21% of this amount. Also in 2020, Montenegro borrowed €750 million from a consortium of banks, with a repayment period of only seven years against 2.95% interest. Montenegro has indicated it wants about €500 million from the EU. The financial woes and China’s extending influence threaten Montenegro’s troubled path to accession to the union, currently planned for 2025.
Tycho de Feijter
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