Montenegro’s Ministry of Finance paid the Chinese Exim Bank the fifth tranche of the loan for the construction of the priority section of the Bar-Boljare highway in the amount of $40.7 million, Pobjeda reported Pobjeda.
The ministry clarified that the amount of $32.79 million relates to the principal, while the remaining $7.91 million relates to loan interest.
“The obligations to Exim Bank are denominated in US dollars, and when settling the obligations, Montenegro is obliged to provide dollars and repay the obligations in dollars. Given that, after exiting the hedging scheme, the state earned about $64.03 million, the stated amount will be used to pay the fifth installment. Therefore, there is no need to provide dollars to the market because they have already been provided, which avoids conversion costs,” the ministry said.
They added that if Montenegro had been required to provide dollars, without the hedging arrangement in place, the dollars would have been bought at the market rate, so the cost of the fifth installment in euros at the average CBM exchange rate on July 19 would have been about 36.2 million euros.
“If, on the other hand, the hedging agreement had continued under the same conditions defined by the 2021 agreement, which is impossible because market conditions have changed significantly and the agreement could not have been continued under the same conditions, the cost of the fifth loan tranche in euros would have been about 30.9 million euros,” the statement said.
So far, the government has paid the Chinese Exim Bank $208.7 million of the loan for the construction of the highway.
“Of this amount, $124.9 million relates to the principal, and $83.8 million is allocated to interest payments.” At the same time, it should be noted that interest payments began in 2015, while principal repayment began in 2021,” the Ministry of Finance said.
Repayment of the highway construction loan to date
The first loan installment was paid on July 21, 2021: principal repayment amounted to $29.21 million, and interest was repaid in the amount of $8.12 million. The second loan installment was paid on January 21 last year — the principal amount was $30.47 million, and interest was $8.2 million, Pobjeda recalls.