Montenegro aims to secure loan from UAE

By bne IntelliNews April 30, 2015

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Montenegro is reportedly in talks with the United Arab Emirates (UAE) on a possible loan deal to refinance the country’s public debt, according to Finance Minister Radoje Zugic.

Montenegro is one of a growing number of countries from Southeast Europe to consider borrowing from the UAE. At the same time, UAE-based investors have become more active in the region. 

The Montenegrin government is hoping to strike a low interest loan deal with the UAE, Independent Balkan News Agency quoted Zugic as saying. He added that Prime Minister Milo Djukanovic is in talks with Sheikh Mohamed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, on the reprogramming of the country’s debt repayments for next year (estimated at €380mn) but provided no further details.

As of end-December 2014, Montenegro’s net public debt totalled €2.02bn, equalling 59.6% of the full-year GDP forecast, according to a document published after a government session on March 26. The share of foreign debt was 75.38%, or €1.56bn. Payments on Eurobonds totalled €647.36mn (31.25% of net public debt), and liabilities to the International Bank for Reconstruction and Development (IBRD) stood at €229.39mn (11.07% of net public debt).

Montenegro’s public debt has increased sharply since 2008 when it stood at just 29% of GDP. In 2014, public debt was planned to tick up to 58.1% of GDP from 58.0% in 2013 before decreasing to 56.2% of GDP in 2015 and 52.8% in 2016, according to the 2014-2017 macroeconomic and fiscal policy guidelines published on the government's website in May last year. It is forecast to fall to around 48% of GDP in 2017.

Serbia secured a $1bn budget support loan from the UAE in March 2014, at a 2% interest rate. Croatia may also be in line for a loan from the UAE, as local media reported in early March that the government is in talks over a possible $2bn loan to fund debt refinancing.

Meanwhile, investors from the UAE have stepped up their presence in the Western Balkans, with Serbia the largest recipient of investment so far. On April 26 the Serbian government signed an investment contract for the €3.5bn Belgrade Waterfront project with UAE-based Eagle Hills. The government said in a statement that the giant mixed-use development on the bank of the Sava river would provide a significant boost to the economy.

This follows Etihad Airways’s 2013 acquisition of a 49% stake in Serbia’s struggling Jat Airways. Etihad has since embarked upon an ambitious rebranding and modernisation programme partly financed by the Serbian state, as it aims to turn Belgrade into an air transport hub for the region.

Montenegro has also been a target for some investors, including Abu Dhabi Capital Management, which announced in May 2014 that it had signed an agreement on construction of a new hotel within the existing Atlas Capital Centre in Podgorica.

Elsewhere in the region, in February Dubai-based Buroj Property Development announced plans to build a €2.3bn luxury resort in Bosnia and Herzegovina near the site of the 1984 Sarajevo Winter Olympics.

Kosovo is also keen to secure investment from the UAE. On April 26, Kosovan President Atifete Jahjaga signed an economic co-operation agreement that will open the way for Emirati companies to invest in the country. In future, cooperation between the two countries is expected in sectors including trade, industry, agriculture, transport, telecoms and tourism, according to a statement on the presidential website. []

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