Montenegro seeks money to build the second phase of the highway

Montenegro’s finance ministry said on Wednesday it was negotiating with European banks over funding for the second phase of the Bar-Boljare highway.
On July 13, Prime Minister Dritan Abazovic opened the first section of the highway, seven years after the start of the Chinese-funded project, and boosted Montenegro’s public debt to 90.85% of GDP.
“So far, the ministry has held talks with a large number of creditors interested in participating or fully resuming the refinancing of highway construction loans. The Hungarian government, through the Hungarian Exim Bank, followed by the European Bank for Reconstruction and Development, EBRD, and the European Investment Bank, EIB, has shown the most interest,” said the ministry at BIRN.
“A a feasibility study is underway which should show the actual potential costs of building the remaining sections of the motorway, which will help identify potential sources of funding,” he added.
The Bar-Boljare highway represents the Montenegrin section of a wider highway that will stretch from the Adriatic coast to the Serbian capital, Belgrade.
On July 20, the Ministry of Capital Investments said the second phase of 23.5 kilometers, from Matesevo to Andrijevica, would probably cost some 552 million euros.
The 41 kilometer long first phase was built by the Chinese Road and Bridge Corporation, CRBC. It was 85% financed by an $810 million loan from the Chinese bank Exim.
In 2018, CRBC requested an additional €115 million for further works as well as the construction of a water and electricity supply network on the highway, which were not detailed in the contract.
The first phase was scheduled to end in November 2019, but completion was delayed three times due to technical issues and the COVID-19 pandemic.
On July 7, Finance Minister Aleksandar Damjanovic said the project had been implemented without parliamentary oversight, warning that the total cost of the first phase could reach 1.2 billion euros. The ministry told BIRN that 141 million euros had been paid to the Chinese bank so far.
Last November, the Ministry of Capital Investments published two previously confidential international feasibility studies, which suggested that the estimated cost of the first phase of the Bar-Boljare highway had been exaggerated.
A feasibility study by URS Infrastructure and Environment, a UK engineering consultancy, said the first phase is expected to cost €803m. Another study, by another UK consultancy, Scott Wilson Group, said it is expected to cost $570 million.
The studies were carried out in 2009 and 2012, but the previous government, which launched the highway project, classified them as confidential.
The EU is also concerned about the costs of the motorway. In last year’s progress report on the country, the European Commission noted that Montenegro had requested co-financing for the construction of the second section of the highway under the Western Balkans Investment Framework.
“However, the application is on hold, pending finalization of the EU-funded cost-benefit analysis for the entire Bar-Boljare highway, including on recommended construction standards and means of financing. suggested for the remaining sections,” the report said.