Montenegro's finance minister has announced a deal with three Western banks to help Podgorica hedge payments on a controversial billion-dollar Chinese loan for a highway project that put the small Balkan country in perilous financial straits.
Finance Minister Milojko Spajic said on July 8 that the deal, with two unnamed U.S. and one French bank, was "not a classic replacement" of the Chinese loan but effectively reduced interest rates.
A previous Montenegrin government borrowed nearly $1 billion from China in 2014 to fund a 41-kilometer portion of a 163-kilometer highway to neighboring Serbia.
The long-delayed project and looming debt to the Export-Import Bank of China are at the heart of a heated debate on Chinese influence in Europe and NATO-member Montenegro's political choices.
SEE ALSO: China In Eurasia Briefing: Beijing's Controversial European Projects Get Pushed Into The SpotlightThen-Prime Minister Milo Djukanovic is now Montenegro's president and the current government -- with a razor-thin majority after taking office in December -- is made up of opposition parties that mostly opposed the highway project and have since searched for a financial solution to the mounting debt.
In April, Montenegrin officials sent an official request to the European Commission asking for assistance to settle the Chinese debt, and EU officials hinted recently that they were working behind the scenes to help.
Spajic declined to identify the foreign banks involved but said details would emerge soon.
The first section of the Bar-to-Boljare highway was originally due for completion in 2019, but construction delays and the COVID-19 pandemic have pushed the deadline back to November 30.
SEE ALSO: No Clear Option For Montenegro As It Tries To Repay $1 Billion Highway Debt To ChinaTourism-dependent Montenegro's economy shrank by about 15 percent last year under the pandemic.
As a result of the highway deal, China holds about one-quarter of Montenegro's total debt, which reached 103 percent of GDP last year.
Beijing agreed to defer repayment of Montenegro's first tranche of the loan, which was originally due in July but has been pushed back to late 2022.
Outgoing German Chancellor Angela Merkel this week urged the European Union and potential members in the Western Balkans to make progress toward accession a strategic priority.
Albania, Montenegro, North Macedonia, Serbia, Kosovo, and Bosnia-Herzegovina all want to join the EU.