Montenegro is preparing for a significant refinancing cycle after government projections indicated that approximately €3.2bn in financing could be required between 2027 and 2029, with most of the funding intended to refinance existing public debt and the remainder allocated to capital investment.
Majority of borrowing earmarked for refinancing
Government projections show that approximately €2.4bn of the planned financing would be used to refinance existing liabilities, while a further €800mn would support capital and priority projects, including investments in transport, healthcare, environmental protection, railway modernisation and digital infrastructure.
The most immediate financing pressure is expected in 2027, when approximately €1.12bn of public debt is scheduled to mature. That amount includes the €750mn eurobond issued in December 2020, making 2027 one of Montenegro’s most significant refinancing years since the country restored its independence. Government macroeconomic guidelines indicate that total financing requirements could reach approximately €1.42bn in 2027, taking into account debt repayments, the projected budget deficit and planned capital expenditure.
Multiple financing instruments available
The projected financing requirement does not mean Montenegro must raise the entire amount through a single market transaction. The government could combine eurobond issuance, bilateral borrowing, loans from international financial institutions, domestic borrowing, cash reserves and pre-financing before major debt maturities fall due. The scale of the refinancing requirement nevertheless increases the importance of global interest rates and sovereign credit spreads for the country’s fiscal position.
Public debt projected to outpace economic growth
Official projections indicate that net public debt will increase from approximately €4.38bn at the end of 2025 to €5.54bn by 2029, representing growth of around 26.5%. During the same period, nominal gross domestic product (GDP) is projected to expand by approximately 20%, meaning public debt would grow faster than the economy under the government’s baseline scenario. The projections indicate that while borrowing for productive infrastructure may support long-term economic activity, faster debt growth reduces fiscal flexibility and increases the importance of selecting investment projects carefully.
Refinancing costs remain a key consideration
A substantial share of future borrowing will replace existing debt rather than increase the overall stock of liabilities by the full amount raised. However, refinancing existing obligations could significantly affect annual debt-servicing costs. Debt issued during periods of historically low European interest rates may need to be refinanced at higher yields, increasing pressure on future government budgets.
Early market access could reduce refinancing risks
The government’s ability to access financial markets before major maturities become due will be closely monitored. Pre-financing part of the 2027 refinancing requirement could reduce execution risk and limit the need to borrow during unfavourable market conditions.
Such an approach would require maintaining a larger cash buffer, temporarily increasing gross public debt while improving liquidity security.
International institutions could support funding
Loans from the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and other international development institutions could provide an additional source of financing. Although such funding is generally linked to specific projects and follows slower disbursement schedules, it can reduce the amount of financing that must be obtained through commercial bond markets.
Capital projects account for €800mn
The government has allocated approximately €800mn for priority investment projects. Planned borrowing would support capital expenditure in areas expected to improve economic performance by removing infrastructure bottlenecks, increasing productivity and attracting private investment. The economic impact of these investments will depend on project implementation, including adequate preparation of design documentation, permitting procedures and procurement processes.
Infrastructure pipeline faces execution challenges
Montenegro’s record of slow execution of its capital budget increases the importance of delivering planned investments on schedule. The value of new borrowing will depend on whether funding is converted into completed roads, railways, hospitals, energy infrastructure and environmental systems within reasonable timeframes. Major projects competing for financing and administrative capacity include the Mateševo–Andrijevica motorway section, the Budva bypass, railway modernisation projects and municipal environmental investments. Cost overruns or implementation delays on large infrastructure schemes could increase borrowing requirements beyond current government projections.
EU accession adds further investment requirements
Montenegro’s sovereign financing strategy is also linked to its European Union accession process. The country is expected to increase spending on regulatory alignment, environmental compliance, border management systems, transport infrastructure and public administration reform. Although European grants and concessional financing are expected to fund part of these investments, national co-financing will continue to be required.
Fiscal credibility remains important for investors
Investors are expected to assess the balance between tourism-driven economic growth, current government expenditure and infrastructure investment commitments. While Montenegro benefits from using the euro, eliminating currency risk on euro-denominated debt, it cannot issue its own currency or rely on an independent central bank to finance government borrowing during periods of market stress.
A transparent debt-management strategy, a realistic capital investment programme and a functioning independent Fiscal Council could help contain the sovereign risk premium demanded by investors. With the 2027 refinancing cycle approaching, the government has time to prepare for upcoming debt maturities. Additional permanent expenditure commitments and delays in implementing capital projects could reduce financing flexibility before Montenegro returns to international capital markets.
