At the end of last year, the total public debt of Montenegro amounted to EUR 4.1 billion, or almost 71% of GDP. According to the data of the Ministry of Finance, it is higher by 60 million, or 13%, than the year before. Of that amount, the national debt is slightly more than four billion, while the debt of local self-governments is around EUR 76 million.
Statistics show that in the last three years there has been a decrease in the public debt in absolute amount, and the reason is that in 2021 and 2022 there were no major debt obligations.
In 2021, compared to the previous year, the public debt was reduced by EUR 246.16 million (21.33% of GDP), while last year compared to 2021 it was EUR 60.58 million (13.24% of GDP).
The ratio of foreign and domestic debt
The analysis of the public debt shows that we owe the most to foreign creditors, more than 3.5 billion, because we borrowed the most through Eurobonds and from foreign banks and financial institutions. Thus, Montenegro owes the most to the Chinese Exim Bank for the highway, more than 700 million, while the state borrowed more than 1.75 billion EUR through Eurobonds.
The largest foreign creditors
The state also borrowed on the domestic market, i.e. with commercial banks, but also by issuing bonds on the domestic market. Thus, at the end of last year, the domestic debt amounted to about EUR 468 million, or about eight percent of GDP. Out of that amount, we have the largest liabilities on the basis of bonds in the amount of EUR 142.44 million, while the state owes domestic banks EUR 156.24 million.
The state of domestic debt also includes the debt of legal entities and companies that mainly provide services of public interest, which are under management control and mostly financed from the state budget, in the amount of about EUR 37.36 million. The amount of the mentioned debt mostly includes the debt of Railway Infrastructure in the amount of about 33.7 million EUR and Railway Transportation in the amount of about 3.46 million EUR.
We borrowed mostly with a fixed interest rate
The Ministry of Finance’s analysis of the interest rates at which we borrowed shows that the debt with a fixed interest rate (78.46%) prevails in the total state debt, so it can be said that from that aspect the debt portfolio is stable. On the other hand, debt with a variable interest rate is mainly linked to EURIBOR, so in the total state debt, they make up 21.54%.
The Ministry of Finance expects that the public debt will continue to grow, and estimates are that it will be around five billion euros in 2025. Comparing that with 2017, when the public debt was two billion 750 million EUR, this means that the public debt will be doubled in nine years.
What did we borrow the most for?
The money obtained by the state through loans was spent for various purposes, from infrastructure projects to repayment of old debts.
We spent a substantial loan of over EUR 700 million from the Chinese Exim Bank on the construction of the first section of the highway from Smokovac to Mateševo, which represents one of the largest infrastructure projects in Montenegrin history.
We often borrowed in order to pay back old debts, and all this most often with the explanation that we were replacing expensive loans with cheaper ones.
However, the fact that the era of cheap loans has passed is shown by the latest state debt in the amount of 100 million euros with Deutsche Bank at an interest rate of 9.3 percent. This is the highest interest rate at which Montenegro has ever borrowed.