Montenegro will have €147.4 million of EU funding available for construction of the Mateševo–Andrijevica motorway section, following an amendment that redirects €2 million to an EBRD grant-management fee and €600,000 to technical assistance.
The overall €150 million EU support package remains unchanged. Of that amount, €147.4 million, or approximately 98.3%, is allocated to the investment itself, while €600,000 funds technical assistance and €2 million, equivalent to about 1.3% of the original grant, covers the European Bank for Reconstruction and Development’s administration of the funds.
The adjustment was required because the EBRD management charge had not been included in the original calculation used to structure the grant agreement. It therefore changes the allocation within the package rather than the total EU commitment to the project. The €150 million allocation is the largest EU grant awarded to Montenegro for a single infrastructure project. The EU initially committed €100 million before adding a further €50 million.
Construction contract exceeds €693 million
The revised grant structure has to be viewed alongside the construction contract now selected for the motorway section. Monteput awarded the design-and-build contract to the POWERCHINA–STECOL–PCCD consortium following a tender conducted under EBRD procedures. The accepted price is €693,969,668.88 excluding VAT.
The competing offers included €735.01 million from the Cengiz–Azvirt consortium and €724.64 million from China Communications Construction Company. The winning bid was therefore approximately €30.7 million below the second-lowest offer and more than €41 million below the highest qualifying bid. At the accepted contract price, the revised €147.4 million EU construction grant covers approximately 21.2% of the design-and-build works. The EBRD sovereign loan of up to €200 million represents another 28.8%.
Combined, the EU construction grant and EBRD loan amount to €347.4 million, or approximately 50.1% of the main construction contract. The remaining requirement is about €346.6 million, or 49.9%, before supervision, VAT and other project-related expenditure.
Financing differs from the first motorway section
The financing structure contrasts with Montenegro’s first priority motorway section, Smokovac–Mateševo. The approximately 41-kilometre section was originally contracted at around €809.6 million, with roughly 85% financed through a China Exim Bank loan. The Mateševo–Andrijevica section has a lower direct debt share. Approximately 29% of the core construction contract is covered by the EBRD loan, while more than one fifth is financed through non-repayable EU funding. Montenegro is expected to finance the balance from its own resources.
The remaining €346.6 million does not necessarily imply that all financing will come from current budget revenues. Montenegro operates with a fiscal deficit and regularly accesses capital markets, meaning domestic contributions to the motorway form part of the broader sovereign financing requirement. The EU grant reduces the amount that would otherwise have to be financed through taxation or borrowing, but it does not remove the project’s effect on public finances.
EBRD loan will be released in two tranches
The €200 million EBRD facility is structured in two €100 million tranches. The first €100 million tranche was to be committed when the financing was signed. The second €100 million remains formally uncommitted and is expected to become available around 2028, subject to satisfactory project progress and compliance with environmental and social requirements.
Montenegro therefore does not have an unconditional €200 million EBRD facility available from the start of construction. Near-term committed external financing is centred on the EU grant and the initial EBRD tranche, while access to the second €100 million depends on implementation.
Mountain terrain raises construction intensity
The Mateševo–Andrijevica motorway section is approximately 22–23 kilometres long, depending on the measurement used in project documents. The route descends from Mateševo at approximately 1,060 metres above sea level towards Andrijevica at around 780 metres. The project includes the 3.6-kilometre Trešnjevik tunnel, 21 bridges with a combined length of about 4.8 kilometres, the Andrijevica interchange and associated motorway operation and maintenance facilities.
Tunnels and bridges therefore account for more than one third of the route length. The accepted construction price corresponds to approximately €30 million–€31.5 million per kilometre, depending on whether the section is measured at 23 kilometres or 22 kilometres. For comparison, the original €809.6 million contract for the 41-kilometre Smokovac–Mateševo section implied approximately €19.7 million per kilometre. The comparison is affected by differences in terrain, structures, inflation, design scope and contract conditions.
Project cost has risen from earlier estimates
The financial envelope is also higher than earlier figures used during the preparation of additional EU support. When Montenegro and the EU were arranging the additional grant financing in 2025, official communications referred to a project value of approximately €600 million. The current construction contract alone is nearly €694 million excluding VAT, around €94 million or 15.7% above that earlier reference value.
Supervision and other implementation expenses are additional to the construction contract.
Monteput has separately appointed Italy’s IRD Engineering to supervise the design and construction under a contract worth €14.45 million excluding VAT. The supervision services are planned for 90 months, including the defects-remediation period. The identified contract values therefore exceed €708 million before VAT and other ancillary costs. Against that scale, the €2.6 million reduction in direct EU construction funding is relatively small. It represents only about 0.4% of the €693.97 million main works contract.
Public debt remains a key financing consideration
Montenegro’s financing position is particularly relevant in 2026, as the country manages major infrastructure commitments alongside refinancing requirements. Gross public debt stood at €5.13 billion, or 59.9% of GDP, at the end of the first quarter of 2026. Central-government debt was approximately €5.11 billion, or 59.6% of GDP, while government deposits reduced net central-government debt to around 52% of GDP.
The Ministry of Finance’s latest medium-term framework projects gross public debt to rise temporarily to approximately 68% of GDP by the end of 2026. The increase is largely associated with pre-financing obligations due in 2027, including a €750 million Eurobond. The debt ratio is expected to decline towards 59.9% by 2029. Against this backdrop, grant and concessional financing reduce the amount Montenegro would otherwise need to raise through conventional sovereign borrowing. Every euro covered by the EU grant avoids the need to finance that portion through taxes or debt. The €147.4 million investment grant consequently also reduces future interest expenditure and the motorway’s contribution to refinancing requirements.
Additional project costs could affect the final fiscal burden
The main financial risks lie beyond the €2.6 million adjustment. Construction-price changes, design modifications, geological conditions and claims under the contract can affect the final cost. A 10% increase in the €693.97 million construction contract would amount to nearly €69.4 million, more than 26 times the amount redirected from direct EU construction financing.
The project is being implemented under FIDIC Yellow Book design-and-build conditions, placing significant responsibility for detailed design and execution on the contractor. Procurement followed EBRD rules, while international supervision, technical assistance and lender monitoring provide additional oversight. The €600,000 technical-assistance allocation is part of that financing structure, while the €2 million EBRD administration fee covers management of the grant funds.
Sovereign ratings remain below investment grade
Montenegro’s sovereign-credit position provides another context for the motorway financing. S&P rates Montenegro B+ with a positive outlook, while Moody’s rates the sovereign Ba3 with a positive outlook. Both agencies improved their outlooks during 2026. Montenegro nevertheless remains below investment grade.
The cost of public debt has increased despite the improved outlooks. The average implied cost of public debt rose from approximately 2.22% in 2022 to about 3.30% in 2025, while annual interest expenditure increased from around €92 million to €161 million. Higher European interest rates and refinancing of older, lower-cost liabilities have increased the financing cost associated with new borrowing.
Motorway forms part of the wider Bar–Boljare corridor
Mateševo–Andrijevica forms part of the Bar–Boljare motorway, which is intended to connect the Port of Bar with Serbia and Central Europe. The project has also been incorporated into the extended TEN-T Western Balkans–Eastern Mediterranean corridor. The existing Smokovac–Mateševo motorway improved access from Podgorica towards northern Montenegro but currently terminates before Andrijevica and the Serbian frontier. The Mateševo–Andrijevica section will extend the route northwards, while further sections towards Boljare and the Serbian border will still be required to complete the wider corridor. For Montenegro, the project includes an approximately €694 million design-and-build contract, with the remaining construction requirement after the full EU grant and EBRD loan estimated at approximately €346.6 million, before additional project costs.
If spread evenly across five years, that residual amount would correspond to roughly €69 million annually, although actual disbursements will depend on construction progress. The financing model combines EU grant funding, EBRD lending and Montenegrin financing, replacing the much more heavily debt-dependent structure used for the first Bar–Boljare section. The EU’s total €150 million allocation remains in place, while the amount directly available for construction is revised to €147.4 million, with €600,000 assigned to technical assistance and €2 million to EBRD grant administration.
