The European Investment bank finances better roads in Montenegro

The European Investment bank finances better roads in Montenegro

The European Investment bank (EIB) and the Montenegro Government have signed today a €40 million loan for the rehabilitation and upgrading of five main roads in the country. The project will also benefit from a €1.5 million technical assistance grant under the Economic Resilience Initiative (ERI), the first ERI grant awarded to a project in the Western Balkans. This grant will finance the specialised professional services required to supervise the execution of the road works and implement the project successfully.

At the signature event in Podgorica, the EIB was represented by its Head of Division for Slovenia, Croatia and the Western Balkans, Matteo Rivellini, and the Montenegrin Government by Darko Radunović, Minister of Finance, and Savo Paraca, Director of the Traffic Directorate. The EU Deputy Head of the Cooperation Section in the EU Delegation to Montenegro, Audrone Urbonaviciute, also attended the ceremony (TBC).

The total length of road that will benefit from EIB financing and the ERI grant is around 180 km, a quarter of the national network. The project aims to improve road conditions and safety, thereby facilitating trade and regional integration. The scheduled works include the reconstruction and rehabilitation of several bridges and tunnels.

The ERI was launched by the EIB in 2016 following a request from the European Council. The initiative is aimed at addressing social and economic infrastructure gaps and stimulating private sector-led growth and job creation to tackle the root causes of migration. The ERI is financed mainly by the EIB’s own resources; in addition, donor pledges from Member States also contribute to the initiative.

“As the bank of the European Union, the EIB has been investing in the Western Balkans for over 40 years, bringing its expertise, financing instruments and commitment to generating impact through investments that support the priorities of the EU. As such, we are committed to addressing the transport infrastructure gap through the financing of priority projects, in particular under the Connectivity Agenda. With the loan signed today, we are glad to contribute to a project that will promote economic growth and local employment as well as contribute to the stability of international relations in the region”, said EIB Vice-President Dario Scannapieco.

The Minister of Finance of Montenegro Darko Radunović said: “This programme of reconstruction of main roads in the country represents a continuation of the successful cooperation between the EIB and the State of Montenegro” and expressed confidence that “cooperation will be broadened not only in the road, rail and communal infrastructure sectors, but also in the education sector next year. Regarding the terms of lending, this loan, in the amount of €40 million, is characterised by a repayment period that cannot be longer than 20 years from the date of the first withdrawal of funds, while the grace period will be a maximum of five years. When it comes to the interest rate, it will be determined at the time of the withdrawal of funds, which will depend on market conditions. In any case, the final terms will be defined at the time of the first withdrawal of funds and will move in these frameworks.”

The Deputy Head of the Cooperation Section in the EU Delegation to Montenegro, Audrone Urbonaviciute, said: “This road rehabilitation programme is particularly relevant in the context of connectivity reform priorities as the whole process will hopefully contribute to the linking of the EU’s policy dialogue with capital investment. In this context it is of crucial importance to have a common understanding and a coordinated approach in promoting reforms in the transport sector.”

The Director of the Traffic Directorate, Savo Paraca, explained: “The European Investment Bank has also provided €1.5 million for a technical assistance grant to support the promoter in supervising the execution of the road works. The Ministry of Transport and Maritime Affairs (Traffic Directorate) and the EIB started the procedure to choose a supervising body, according to the Bank’s rules. We expect to complete the process by March 2019.”

The EU bank has financed 22 projects worth €720 million in Montenegro since 1977, with infrastructure (road and railways) being a focus. In 2018 the EIB’s support to the country amounts to €140 million, equalising the record high achieved in 2017.

The EIB is the leading international financier in the Western Balkans. Since 2007, the Bank has financed projects totalling almost €8 billion in the region. Besides continuing its support for the reconstruction and upgrading of public infrastructure, since 2010 the EIB has expanded into many new areas, such as health care, research and development, education and SMEs.