Montenegro’s gross public debt declined during the second quarter of 2026, while a larger reduction in government deposits resulted in a higher net debt position at the end of June. Gross public debt stood at €5.02 billion, equal to 58.5% of projected GDP, according to the Finance Ministry’s quarterly report. Central government debt, excluding municipalities, amounted to €4.997 billion, or 58.2% of GDP. Gross debt decreased by €111.1 million from the end of March, while central government debt fell by €109.3 million. The decline was driven mainly by scheduled repayments and the absence of new domestic borrowing.
Net Debt Rises as Deposits Fall
Government deposits decreased by more than €117 million, from €650.5 million at the end of March to €533.4 million in June. Consequently, net public debt increased by almost €6 million to €4.489 billion, equivalent to 52.3% of GDP. Net central government debt reached €4.463 billion, or 51.9% of GDP. The decline in gross liabilities therefore coincided with a reduction in the government’s cash reserves, leaving deposits at a lower level at the end of the quarter.
External Debt Remains Dominant
Foreign debt totalled €4.759 billion, representing 55.4% of GDP, after falling by €44.6 million from the first quarter. Montenegro did not withdraw funds from newly signed loan agreements during the quarter. It drew €48 million from previously agreed facilities and repaid €92.5 million in external principal. International bonds remained the largest component of external debt, with outstanding obligations of around €2.79 billion, equivalent to 32.4% of projected 2026 GDP.
Domestic Borrowing Declines
Domestic debt fell by €64.7 million to €238 million, or 2.8% of GDP. The government repaid €67.3 million in domestic obligations and undertook no new borrowing on the local market. Loans from commercial banks represented the largest domestic debt component, at €90.2 million.
Project Financing and New Loans
Montenegro withdrew €48 million for projects during the quarter. The government drew €20.6 million under the European Union Growth Plan and €14.8 million from International Bank for Reconstruction and Development facilities supporting several projects. A further €10 million was withdrawn to finance patrol vessels for the Montenegrin armed forces. The government also drew €1.6 million from KfW Development Bank for water-supply and wastewater investments and €1 million from the European Bank for Reconstruction and Development for the planned Mateševo–Andrijevica motorway section.
Four new loan agreements with a combined value of €185 million were signed during the quarter, although none had been drawn by the end of June. The agreements include €18 million for the Forests of Montenegro for Shared Prosperity project, €40 million for waste-management reform and €27 million for equipping healthcare institutions. The largest agreement is a €100 million second tranche of a development-policy loan from the French Development Agency.
Debt Service Reaches €186.7 Million
Debt servicing totalled €186.7 million during the second quarter. Montenegro paid €159.9 million in principal and €26.9 million in interest. Principal repayments included €67.4 million to domestic creditors and €92.5 million to non-residents. The newly signed but undrawn loan facilities did not increase the debt stock at the end of June, although they represent future financing flows as project implementation progresses.
Euro-Dominated Debt Limits Currency Exposure
Around 99.74% of government debt is denominated in euros, while 0.26% is held in other currencies. Montenegro uses the euro despite not being a member of the eurozone. The currency structure therefore leaves the debt portfolio with negligible direct foreign-exchange exposure, while the country does not have an independent central bank capable of providing sovereign liquidity.
Fixed-rate liabilities accounted for 79.4% of government debt, compared with 20.6% carrying variable interest rates, mainly linked to Euribor.
Municipal Debt Remains Small
Municipal debt stood at €25.7 million, equivalent to 0.3% of GDP, leaving central government borrowing as the dominant component of public-sector debt.
The Finance Ministry calculated the debt ratios using projected 2026 nominal GDP of €8.59 billion. Montenegro’s gross public debt remained below the 60% of GDP reference level under the European Union’s fiscal framework. Planned motorway construction, environmental investments, healthcare modernisation and EU-related reforms are expected to generate further financing requirements.
