Structure of government debt, in million euros

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1 GOVERNMENT DEBT 06

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3 At end-september 2017, according to the Ministry of Finance data, Montenegro s gross government debt 34 amounted to 2,490.3 million euros or 59.3% of GDP, which represents an increase of 87.3 million euros or 3.6% in relation to end During the first nine months of 2017, the growth of government debt was mostly influenced by the withdrawal of funds of the Credit Suisse Bank loan and Chinese Exim Bank loan for the financing of the construction of the first section of the highway, as well as the withdrawal of funds from Intesa Bank for budget financing. Despite new borrowing, there was a decline in the share of government debt in GDP, as a result of increased expected real growth and estimated nominal amount of GDP for Out of the total amount of gross government debt, 2,059 million euros or 82.7% referred to external debt, while the remaining million euros or 17.3% referred to domestic debt. If deposits of the Ministry of Finance were included, as well as the 38,477 ounces of gold, the net government debt of Montenegro would amount to 2,396.2 million euros, or 57% of the estimated GDP at end-september Compared to end-2016, net government debt increased by 1.7%. Table 6.1 Structure of government debt, in million euros September 2016 December 2016 March 2017 June 2017 September 2017 Domestic debt External debt 1, , , , , Government debt (gross) 2, , , , , Deposits of Ministry of Finance, including 38,477 ounces of gold Government debt (net) 2, , , , , Government Debt The currency structure of the government debt is favourable. The entire domestic debt is in euro, while 87% of the total foreign debt is in euro. Most government debt is serviced at fixed interest rates (80%), thus the interest rate structure of government debt can be seen as favourable Domestic debt At end-september 2017, domestic debt amounted to million euros, being 31.1 million euros or 7.8% higher than at end Withdrawal of funds based on loan arrangements with domestic banks is the main reason for the increased debt towards residents during the first nine months of (Table 6.2). 34 Pursuant to the new Law on Budget and Fiscal Accountability, quarterly reports present state debt, while annual report publishes public debt. The Law defines public debt as a debt of the Central Government Level (government debt) and debt of the Local Government Level (debt of local government), precisely of the General Government Level. Government debt includes central government debt and debt of state companies. Unlike previous periods, government debt does not include debt of local self-governments. 81

4 Central Bank of Montenegro CBCG Macroeconomic Report Q Table 6.2 Domestic debt structure Domestic debt status and structure Debt balance Debt balance Debt balance Change Share in domestic debt (3-2) 5 (3-1) 6 (3/2) 7 (3/1) 8 million euros % % Foreign currency deposits Restitution Loans with commercial banks Accrued pensions T-bills Labour Fund bonds Government bonds Legal persons and companies TOTAL Following new loan arrangements with domestic banks, the structure of domestic debt recorded significant changes. At end-september 2017, in the domestic debt structure, the largest share was recorded by the loan payables with commercial banks %, followed by liabilities arising from T-bills and restitution by 20.3% each, while the share of liabilities arising from issued government bonds in the domestic debt amounted to 20% (Table 6.2) External debt According to Ministry of Finance data, external debt of Montenegro amounted to 2,059 million euros or 49% of GDP at end-september 2017, recording an increase of 56.2 million euros or 2.8% compared to end During nine months of 2017, there were the following withdrawals of funds arising from loan arrangements with international institutions, in the total amount of million euros: Withdrawal of funds from Credit Suisse Bank in the total amount of million euros; Withdrawal of million euros from the Chinese Exim Bank (for the construction of the Bar Boljari highway section), Withdrawal of funds of Intesa Bank in the amount of 30 million euros (for budget financing), Withdrawal of the Council of Europe Development Bank funds in the amount of 4.85 million euros (for the project apartments phase II), Withdrawal of KfW funds in the amount of 4.59 million euros (for the projects: Water-supply and Waste Water Discharge, phases III, IV, and V, and Energy Efficiency Program in Public Buildings - Phase II ), Withdrawal of IBRD funds in the amount of 3.76 million euros (for the projects Midas - additional financing, Energy efficiency in Montenegro - additional financing, and Higher Education and Research for Innovation and Competitiveness ), Withdrawal of EBRD funds in the amount of 1 million euros (for the purposes of local roads reconstruction and municipal parliament of Danilovgrad). 82

5 Table 6.3 Structure of external debt, as at 30 September 2017 Creditor Debt balance External debt GDP Share in external debt million euros % Share in government debt International Bank for Reconstruction and Development (IBRD) Member countries of the Paris Club of creditors International Development Association (IDA) European Investment Bank (EIB) EBRD Council of Europe Development Bank European Commission Kreditanstalt für Wiederaufbau Germany (KFW) Loan from Hungary Loan from Poland Loan from France - Natixis EUROFIMA - debt of AD Željeznica Crne Gore Czech EXIM - debt of AD Željeznica Crne Gore Steiermarkische Bank und Sparkassen AG Erste Bank Credit Suisse Bank Chinese EXIM Bank Loan from Spain for the construction of landfill Loan from Austri a EUROBOND 1, Banka Intesa International Fund for Agricultural Development (IFAD) TOTAL 2, Government Debt 1 EIB loans amounting to 47 million euros in total servicing state enterprises ( Monteput, Airports of Montenegro and EPCG ) are not calculated in external debt, but are treated as guarantees. 2 Loans with KfW for the needs of water supplies are used by municipalities, but they are considered a part of external debt. 3 Merchandise loan - EPCG 4 Loan for financing the purchase of fire engines for Ministry of Interior 5 Loan for construction of part of the highway Bar - Boljari. The structure of external debt shows that the highest share belongs to liabilities arising from issued Eurobonds (52.5% of external debt), while the Chinese Exim Bank stands as the largest individual creditor with a share of external debt of 11.7%. It should be noted that there are granted credit line funds which have not been withdrawn. Total amount of available non-withdrawn funds amounted to million euros (where 558 million euros refers to Chinese Exim Bank). 83

6 Central Bank of Montenegro CBCG Macroeconomic Report Q Table 6.4 Structure of external debt and non-withdrawn funds, in million euros Creditor Debt balance million euros Amount of non-withdrawn funds International Bank for Reconstruction and Development (IBRD) Member countries of the Paris Club of creditors International Development Association (IDA) European Investment Bank (EIB) EBRD Council of Europe Development Bank European Commission Kreditanstalt für Wiederaufbau Germany (KFW) Loan from Hungary Loan from Poland Loan from France - Natixis EUROFIMA - debt of AD Željeznica Crne Gore Czech EXIM - debt of AD Željeznica Crne Gore Steiermarkische Bank und Sparkassen AG Erste Bank Credit Suisse Bank Chinese EXIM Bank Loan from Spain for the construction of landfill Loan from Austria (Erste Bank) EUROBOND 1, Banka Intesa International Fund for Agricultural Development (IFAD) TOTAL 2, Issued guarantees At end-september 2017, total government guarantees amounted to million euros or 7.6% of estimated GDP, recording a decrease of 6.9% in relation to end With the inclusion of issued government guarantees, Montenegro s government debt amounts to 2,811.4 million euros, which is 66.9% of GDP. Foreign guarantees of Montenegro amounted to million euros or 6.4% of GDP. If foreign guarantees were to be included into the external debt, the external government debt of Montenegro would amount to 55.4% of GDP. It should be noted that the above amount of foreign guarantees refers to withdrawn credit assets. Considering the total underwritten amount, foreign guarantees reached the amount of million euros. At end-september 2017, total domestic guarantees amounted to 52.4 million euros (1.2% of GDP). Domestic debt with the guarantees amounted to 11.5% of GDP. In the total amount of domestic gu- 84

7 arantees, 36.1 million euros referred to the guarantees issued to municipalities for loans with various commercial banks for the implementation of the recovery plan 35. During the first three quarters of 2017, there were no called guarantees. Graph 6.1 Issued foreign guarantees 6.4. Debt repayment During the first three quarters of 2017, according the preliminary data of the Ministry of Finance, total debt repayment 36 amounted to million euros or 10.3% of estimated GDP. In total amount of debt repayment, the main share referred to repayment of principal of debt to residents and non-residents in the amount of million euros and to repayment of interest arising from loan arrangements to residents and non-residents in the amount of 85.7 million euros. Repayment of liabilities from the previous period amounted to 32.8 million euros. Graph 6.2 Debt repayment in the period January- September 2017, in million euros Government Debt 35 Total underwritten amount of guarantees for loans used by municipalities for the recovery plan implementation is million euros. 36 Total debt repayment includes repayment of debt arising from principal, interest repayment, as well as repayment of debt from previous years. 85