The Ministry of Finance is monitoring international market developments to determine the most favorable timing for a potential bond issuance, and one of the options is potentially issuing bonds in the domestic market, as reported from the Ministry of Finance.
According to the Ministry, funds from borrowing will be used exclusively for servicing existing debt, financing the capital budget, and creating a fiscal reserve for the next year. This year, the debt to be repaid amounts to a total of 656.7 million EUR, including 518.6 million in principal and 138.7 million in interest. In total, until the end of 2027, the debt to be repaid is 3.04 billion EUR.
“The Ministry of Finance is considering the possibility of issuing bonds and entering into arrangements with international financial institutions and commercial banks to make appropriate decisions in the future, depending on market conditions, regarding the arrangements for budget financing. Compared to previous periods, the financial market is more stable, and the conditions are moving towards reducing interest rates, which will impact future borrowing in the international/domestic markets,” said officials from the Ministry of Finance.
They stated that discussions will be held with commercial banks regarding the borrowing terms.
“Considering that commercial banks in Montenegro are mostly subsidiaries of large groups from the surrounding area, which monitor the prices of our bonds in the international market, it is expected that the terms would be similar to those on the international market,” said the Ministry of Finance.
They mentioned that, in accordance with the Budget Law for this year, funds obtained through borrowing will be used exclusively for servicing existing debt, financing the capital budget, and creating a fiscal reserve for the next year.
“No new budgetary expenses will be financed from borrowing, except for the capital budget, thereby fulfilling the golden rule of the budget – that all current obligations are financed from current revenues.
According to the Budget Law for 2024, the possibility of borrowing up to 650 million EUR for the needs of providing necessary funds for this year is foreseen, as well as up to 500 million for debt refinancing and creating a fiscal reserve for 2025, all through concluding credit arrangements with international financial institutions, domestic and/or foreign banks, through the issuance of government bills and/or bonds in the domestic and/or international markets, as well as through concluding bilateral or other credit arrangements.
Next year, 969 million EUR need to be repaid, in 2026, 476.66 million, and in 2027, 955.53 million.
According to preliminary data, at the end of last year, the total public debt amounted to 4.125 billion EUR, or 62.28% of GDP.
“Taking into account the deposits of the Ministry of Finance (including 38,477 ounces of gold), the preliminary net public debt of Montenegro, as of December 31, 2023, amounts to 3.99 billion euros, or 60.24% of GDP,” said the Ministry of Finance.
They expect expert support from the IMF and a loan from the World Bank.
“The Ministry of Finance is currently in negotiations with the World Bank regarding the conclusion of a DPL (Development Policy Loan) arrangement and expects it to be completed by the end of the second quarter of this year. Funds from this borrowing will be used for debt repayment and creating a fiscal reserve,” said officials from the Ministry.
