European Western Balkans

Montenegro reduces interest rate to Chinese bank through an agreement with Western banks

Montenegro Flag; Photo: Pixabay / Sergei Petrov

PODGORICA – Government of Montenegro announced last week an “incredible success” in the form of a “hedge” agreement with three Western banks to protect the currency risk of the large Chinese loan taken out to finance the Bar-Boljare highway, with the Minister of Finance announcing that the agreement lowered the interest rate from 2% to 0,88%.

“The creditor is still the Chinese Exim Bank, but two American banks and one French bank participated in the transaction,” said Finance Minister Milojko Spajić, who did not want to say which banks were involved, Radio Free Europe reports.

Several opposition politicians, but also a leader of the majority-member Movement for Changes Nebojša Medojević, requested full information on the agreement made by the Government, which have not been provided so far.

The US embassy in Montenegro praised the arrangement, saying it will further secure Montenegro’s financial stability, while the US Special Representative for the Western Balkans, Matthew Palmer urged caution in business deals with China during a meeting with Spajić, Balkan Insight reports.

In return, Chinese Embassy in Montenegro released a statement saying that the United States official should care about their own relations with Montenegro and less about Chinese-Montenegro relations.

In March, Deputy Prime Minister Dritan Abazović asked for EU’s assistance in a meeting with European Parliament Foreign Affairs Committee (AFET) in March. The statements of EC Spokespersons in April that the EU does not help with repaying the loans from the third parties has caused negative reactions.

The European Commission subsequently announced that it had received an official letter from the Prime Minister of Montenegro and is working on a response on how to support the country in repaying the loan taken from Chinese ExIm Bank in 2014. In the meantime, the Government has apparently reached an agreement with individual banks, separate from these efforts.

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