NewsMontenegro pursues additional financing for development initiatives

Montenegro pursues additional financing for development initiatives

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In addition to securing the initial installment of the Development Policy Loan (DPL) worth 80 million euros from the World Bank (WB), the Government is currently engaged in negotiations to obtain an extra 100 million euros in credit from the French Development Agency (AFD) and the OPEC International Development Fund.

As reported by Pobjeda, this information was disclosed in a briefing regarding the negotiation terms with the French authorities, recently approved by the Government.

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This combined loan of 180 million euros is intended to provide supplementary funds for budget financing, thereby establishing fiscal reserves.

The Ministry of Finance is optimistic about the potential negotiations, expecting more favorable terms than those available in the market, particularly concerning repayment periods and interest rates.

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Preliminary discussions with the French Development Agency suggest a proposed repayment term of ten years, with a grace period ranging from one to three years. The interest rate would be variable, linked to the Euribor, with a margin of 0.8 percent.

Development Policy Loans (DPLs) are financial instruments offered by international financial institutions like the WB, aimed at assisting countries in implementing critical political and institutional reforms to drive economic growth and alleviate poverty.

Apart from the funding allocated by the WB for developmental policies, the arrangement aims to incorporate funds from the French Development Agency and the OPEC International Development Fund. Both entities have expressed interest in providing additional loans of 50 million euros each, complementing the WB’s contributions.

To proceed with the DPL arrangement, certain prerequisites must be met. These include enhancing fiscal sustainability by boosting revenues through the introduction of excise duties on specific products and the establishment of an independent fiscal council.

Moreover, improving transparency in state-owned enterprises and strengthening waste management and green growth initiatives are integral components of the prerequisites.

While progress has been made in meeting these conditions, such as the enactment of the Waste Management Law and the adoption of the Draft Forest Law, further steps are necessary, including the approval of the Draft Law on Renewable Energy Sources.

Additionally, in early March, the Ministry of Finance successfully conducted an international bond issuance amounting to USD 750 million, or EUR 687.76 million, along with hedging transactions. According to the Budget Law, the Government retains the option to borrow an additional EUR 463 million.

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