Montenegro starts paying off $1 billion Chinese road loan

A view of the construction of the China-financed highway in Montenegro [Government of Montenegro]

Montenegro paid the first instalment of a billion-dollar road loan from China that critics say could wreck the Balkan nation’s economy.

Montenegro took out the $944 million loan in 2014 as part of a plan to build a highway from the Adriatic port of Bar north to the border with Serbia.

It was one of several Chinese projects in the Balkans that have raised concern about governments becoming too reliant on funds from Beijing.

Montenegro learns true cost of China-backed $1 billion road to nowhere

Two sleek new roads vanish into mountain tunnels high above a sleepy Montenegrin village, the unlikely endpoint of a billion-dollar project bankrolled by China that is threatening to derail the tiny country’s economy.

News reports swirled that Montenegro was struggling to pay and was seeking help from the European Union, but the government insisted everything was in hand.

Finance Minister Milojko Spajic told the local news agency Mina on Wednesday that the first instalment of almost $33 million had been paid to Chinese Exim bank.

The highway is now one of the most expensive in the world, the loan covering only the first 41 kilometres, leaving another 130 kilometres still to build.

The first stretch was supposed to have been completed in 2019 but now is scheduled to finish in November.

Montenegro is scheduled to pay another instalment on the loan in January but government revenues have been hammered by the coronavirus pandemic because tourism is a key sector.

The country’s public debt amounted to 97% of its gross domestic product (GDP) last year, well above the EU’s stated limit of 60%.

The Chinese loan by itself represents almost one-fifth of the country’s GDP, given as 4.9 billion euros.

Montenegro asked the EU for help in refinancing the loan and EU enlargement commissioner Oliver Varhelyi had said the bloc was working on a solution.

Brussels does not want to lose more influence in the Balkans, where Russia is already active, but has baulked at picking up the tab.

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