The World Bank has withdrawn its $50 million loan support to Montenegro’s budget, saying a highway deal agreed with China would put too much strain on the Adriatic country’s finances.
The World Bank loan was intended to help gradually reduce Montenegro’s public debt, estimated at around 58 percent of the gross domes¬tic product.
The 809 million euro ($1.12 billion) highway loan could drive Montenegro’s debt up by another quarter of national output, the bank told Reuters.
“Due to the … impact on debt sustainability, the bank dropped the budget support preparation” and shifted to investment lending for other sectors, the bank said in a statement for Reuters on Friday.
Last week, Montene¬gro’s government sealed an agreement with the China Road and Bridge Corpora¬tion (CRBC), part of China Communications Construc¬tion Company , to build a 40-kilometre (25-mile) sec¬tion of a 120-km highway connecting the south with Serbia in the north.
Transportation Minis¬ter Ivan Brajovic has said negotiations have already begun with China Export Import Bank about a loan to cover 85 percent of the total amount, while the remain¬ing 15 percent would be cov¬ered from commercial loans.
“Expected benefits and cash flow from the highway project are very dubious, and this may bring the coun¬try into debt slavery,” said economic analyst Milenko Popovic, who teaches at University Mediteran in Podgorica.
The World Bank has al¬ready disbursed $164.2 mil¬lion in budget support loans to Montenegro under it 2011-2015 programme.
