The Ministry of Finance (MF) is closely monitoring both international and domestic capital markets, exploring the possibility of collaborating with retail investors through the issuance of state bonds, as reported by “Dan” newspaper.
Retail bonds, which are securities designed to attract surplus funds, are being considered by the government as an avenue to tap into the over 5 billion EUR currently held by citizens and companies in bank deposits.
- The issuance of retail bonds would offer citizens the opportunity to invest their surplus funds under more favorable terms compared to those offered by commercial banks. Given the robust liquidity of commercial banks, such a product would not disrupt the existing market dynamics – stated sources from the Ministry of Finance to “Dan”.
Should retail bonds be issued, citizens who purchase them can expect to receive higher interest rates than those currently offered by banks, where savings interest rates hover around 2% annually.
The potential issuance of state bonds targeting citizens was discussed at a recent meeting of the Committee on Economy, Finance, and Budget, where Irena Radović, Governor of the Central Bank of Montenegro, raised the matter. She pointed out that with total deposits amounting to 5.33 billion and debt standing at 1.2 billion, representing 60% of GDP, the government is contemplating issuing state bonds.
- Consideration is being given to state bonds, as the government could potentially raise between 300 to 500 million EUR. The IMF has expressed positive feedback on this initiative, both in February and more recently – she stated during the Committee meeting.
Earlier this year, the Government of Montenegro successfully raised 750 million dollars by issuing state bonds on the London Stock Exchange, with an interest rate of 5.88%. This issuance targeted investors, with Prime Minister Milojko Spajić highlighting the significance of major global investors participating in Montenegrin bond investments.
He confirmed that the repayment period spans seven years and emphasized that the transaction was concluded on favorable terms.
Spajić clarified that “the only relevant interest rate for Montenegro is 5.88%” and explained that the bonds were issued in dollars for cost efficiency reasons.
He also announced that Montenegro has been officially listed on J.P. Morgan’s index for the first time in history.
Furthermore, Spajić assured that the debt raised would be allocated exclusively to “repaying previous debts and potentially financing capital projects”, emphasizing that none of the funds would be directed towards current expenditures.
The accessibility and pricing of the bonds will determine whether they are targeted towards entities with significant deposits or individual citizens with smaller savings, as explained by sources from the Faculty of Economics. Additionally, it is imperative that any debt raised through state bonds is dedicated to investment purposes rather than current operating expenses.
