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Montenegro's First International Bond Deemed Successful

Vladimir Gligorov, staff economist at the Vienna Institute for International Economic Studies
PODGORICA -- Analysts and Montenegrin officials say strong investor interest in the country's first international bond is proof that the European Union hopeful has a stable macroeconomic situation, RFE/RL's Balkan Service reports.

Montenegro's 10-year, 200 million euro ($275 million) bond with a fixed interest rate of 7.85 percent was issued on September 8 and was oversubscribed three times.

Vladimir Gligorov, of the Vienna-based Institue for International Economic Studies, says that "this is a good sign and a good mark for the macroeconomic stability of Montenegro."

He says investors deem Montenegro's sovereign debt to be relatively low and Podgorica's fiscal policy to be prudent.

"I suppose they reckon that [Montenegrin] government bonds bring a good yield at low risk at a time when there are very few places where investing is not highly risky," Gligorov says.

Analysts and the government have also forecast a slight increase in the country's gross domestic product (GDP) in 2010.

But the government is concerned about a public deficit of 4.2 percent of GDP and a foreign debt that is about one-quarter of the country's GDP.

Deputy Prime Minister Igor Luksic said on September 9 that part of the proceeds from the bond issue will be used to cover the government's economic shorfalls.

He added that the country does not currently need financial support from the International Monetary Fund.