The extension of the Mateševo–Andrijevica highway represents a significant infrastructure initiative for Montenegro, transcending mere transportation improvements. This project is a critical test of the country’s fiscal discipline and regional development strategy, particularly as it navigates the complexities of large-scale construction amid limited public finances. Scheduled to commence in the first half of the year, the economic rationale behind this highway extension warrants thorough examination.
Spanning approximately 23–25 kilometres, this highway section will traverse some of Montenegro’s most challenging mountainous regions. Preliminary cost estimates for the project range from €500–550 million, leading to a unit cost exceeding €20 million per kilometre. Such figures position this initiative among the most substantial infrastructure investments relative to Montenegro’s GDP.
The strategic benefits of this highway are evident, as it aims to connect the economically lagging north-east with the central transportation corridor. This connection is expected to enhance travel efficiency, improve logistics reliability, and bolster tourism and agribusiness in areas facing significant population decline. However, projected traffic volumes remain modest, with initial estimates indicating an average daily traffic of only 6,000–8,000 vehicles, which may not suffice for toll revenue generation.
This situation raises concerns about fiscal sustainability, especially given that Montenegro’s public debt is nearing 70% of GDP. Engaging in large-scale borrowing under non-concessional terms could heighten refinancing risks. Unlike the Bar–Boljare section that benefitted from extended loan maturities, any new debt incurred is likely to attract higher interest rates due to current global financial conditions.
The success of the highway project is contingent upon complementary investments in areas such as industrial zones, tourism facilities, and enhanced cross-border connectivity with Serbia. Without these additional expenditures, there is a risk that the highway could function merely as an expensive transit route rather than a genuine catalyst for regional development. Historical precedents from similar initiatives in the Western Balkans indicate that transport infrastructure alone does not effectively address demographic challenges unless integrated into a comprehensive regional strategy.
The project’s financing model will be crucial in determining its viability. Implementing blended financing approaches that incorporate concessional loans, limited EU grants, and phased construction could alleviate some fiscal pressures. Additionally, maintaining execution discipline is vital; cost overruns of 10–15% could lead to an extra financial burden of €50–80 million, significantly impacting Montenegro’s overall debt trajectory.
In conclusion, the Mateševo–Andrijevica highway extension is more than just an infrastructural endeavor; it represents a pivotal decision with long-term consequences for economic growth, debt management, and regional integration.
