Montenegro’s new government, which took office on December 7, has placed a €750mn Eurobond on international markets, Finance Minister Milojko Spajic said on December 10. 

Spajic commented that the country has been “saved from bankruptcy” by the Eurobond issue after the coronavirus (COVID-19) pandemic hammered the local economy. 

“We went on November 23 [to meet] the [former] finance minister and his team who were very cooperative and honest. We saw what the situation was and for two days took this decision. Since November 25 we started preparations to issue the bonds,” Portalanalitika.me quoted Spajic as saying.

The Eurobond carries a 2.875% coupon. The demand was almost €3bn, Spajic said. The government, finance ministry and central bank have not yet released further details of the offering.

“Montenegro got today an economic future. Mass layoffs, wage and pension reductions and other scenarios that were envisaged for the new government were avoided in the best way for Montenegro. Money was secured for repayment of unfavourable credits and for investment in our growth and recovery,” Spajic wrote on Twitter.

The country was badly hit by the coronavirus pandemic, reporting one of Europe’s highest infection rates in the early autumn. Over 39,000 cases have been confirmed since the start of the pandemic among a population of just 628,000. 

The large tourism sector contributing around 20% of GDP, suffered from the spring lockdown and international travel restrictions, contributing to one of the deepest economic contractions across the emerging Europe region. 

In November, local economists and the central bank suggested that GDP will contract by as much as 17% in 2020, while most international financial institutions expect a contraction of up to 12%.

In response to the coronacrisis, Montenegro was forced to spend more than planned to support the affected sectors, and revised its budget deficit plan to 3.4% of GDP from the initially anticipated 0.99% of GDP.

However, the crisis also pushed up Montenegro’s debt ratio. Montenegro is already highly indebted with the public debt reaching around 80% of GDP as of end-September. China is a major creditor after Montenegro borrowed heavily to build a new highway from the coastal city of Bar to the Serbian border. 

Montenegro is rated B+/B by Standard & Poor’s and B1 by Moody’s. 

The country successfully placed a €500mn 10-year Eurobond in 2019 to refinance public debt. The interest rate of that bond was 2.55%. The demand for the 2019 issue totalled €1.8bn and 190 investors expressed interest.