The Ministry of Finance and the World Bank are currently in negotiations to finalize a Development Policy Loan (DPL) for Montenegro, amounting to up to 80 million EUR. This loan aims to provide additional funds for budgetary financing and the establishment of a fiscal reserve.
Additionally, there is interest from various agencies and funds to contribute further funds under more favorable conditions. This could potentially result in a total funding amount of up to 180 million EUR through this arrangement, as announced by the Ministry of Finance to the City Portal.
Regarding the loan terms, the Ministry believes that favorable conditions can be secured, including a longer repayment period and lower interest rates compared to prevailing market rates.
Further inquiries were made by the City Portal to the Ministry of Finance for additional clarification on the borrowing.
The Ministry elaborated that they deemed the issuance of bonds worth USD 750 million as balanced, facilitating a reduction in the interest rate from an initial 7.75% to a final 7.25%. Through simultaneous hedging transactions to mitigate currency risk, an interest rate of 5.88% resulted in a total debt amounting to 687.76 million EUR. While market conditions were favorable, it was acknowledged that a larger debt volume implies a greater repayment burden upon maturity. Nonetheless, the Ministry considers this amount to be well-balanced, fostering responsible public finance management and sustainable debt management practices.
According to the Budget Law for 2024, borrowing up to 1.15 billion EUR is authorized to cover various needs, including refinancing existing debt and creating a fiscal reserve for 2025. Thus, the Ministry emphasized that the remaining borrowing capacity for this year is approximately 463 million EUR.
In conclusion, the Ministry affirmed its commitment to monitoring market developments to make informed decisions regarding any additional borrowing needs in line with fiscal reserve requirements for 2025. They also underscored their intention to contribute to the development of the domestic capital market through ongoing assessments of its potential.
