Montenegro plans samurai bond to diversify funding sources

Montenegro plans samurai bond to diversify funding sources
Prime Minister Milojko Spajic with VP of Japanese investment bank Daiwa, Keiko Tashiro, at Davos. / bne IntelliNews
By bne IntelliNews January 21, 2024

Montenegro intends to issue a bond on the Tokyo Stock Exchange to diversify its sources of financing, Prime Minister Milojko Spajic wrote on X (formerly Twitter) following a meeting with representatives of the Japanese banking sector on the sidelines of the Davos economic forum.

Spajic said the move would save the country costs on interest rates as Japan remains the sole country where the interest rates on bonds remain zero despite global inflationary pressures.

"Japan is the only country in the world where interest rates are still at 0 percent, in the midst of an inflationary wave,” Spajic wrote on X after a meeting with the vice president and executive director for Europe and America of Japanese investment bank Daiwa, Keiko Tashiro.

“Until now, Montenegro used London as the only market for financing, however, together with Daiwa, the best Japanese investment bank for Samurai bonds, and other local partners, our country will also go to the Tokyo Stock Exchange in the future to diversify sources of financing, but also to save on interest expenses,” Spajic wrote. 

He added that entering the Japan market would not be easy but once the country succeeds it would have a stable partner. He did not comment on how much the country plans to borrow. 

The Montenegrin prime minister studied in Japan after receiving a scholarship from the Japanese government. He studied for one year at Osaka University, before taking a four-year study programme in Econometrics and Quantitative Economics at Saitama University.

Spajic also met at Davos with Japan Bank for International Development (JBIC) governor Nobumitsu Hayashi, to discuss broader cooperation with Japan. 

“Since the 2000s, I don't know of any country that has developed properly without having JBIC, the Japan Bank for International Development, as a key partner. All major Japanese corporations and investors invest abroad using JBIC. It's time for Montenegro to see the biggest Japanese and world investors, and JBIC governor Nobumitsu Hayashi confirmed to me during the meeting in Davos that they are interested in helping us with that!” Spajic wrote. 

Montenegro’s budget for 2024 targets a deficit of €800mn, with revenue seen at €2.7bn, and spending at €3.48bn. This year, Montenegro will have to repay €656mn of debt.

Spajic said in late 2023 that the government’s plan for the next three years is to borrow only for capital spending and for servicing old debt. All current spending should be financed by the current revenue.

The capital spending in 2024 will be €40mn higher than in 2023. This includes between €80mn and €90mn for the start of construction of the second stretch of the key Bar-Boljare motorway.

The major infrastructure project was mainly funded through a $944mn loan from China Exim Bank, which Podgorica has at times struggled to pay. The government recently announced a hedging deal ahead of the loan repayment due in January. 

Aside from the motorway, another €10mn will be spent on capital investment in northern Montenegro, the poorest part of the country. The government intends to spend €760mn for capital investment in the next three years.