The Balkan nation of Montenegro (Montenegro) took out a $1 billion loan from Beijing to build the world’s most expensive highway, but can’t afford to pay back the debt.
The Republic of Montenegro took out a $1 billion loan from China to build the world’s most expensive highway, but can’t afford to repay the debt. Montenegro asked the European Union for help, but the EU said it would not pay back the money. Montenegro is caught in the “China Belt and Road Debt Trap” and may have to cut off its land to repay the debt. Some scholars believe that the bigger crisis than the debt is the political control, if Montenegro can not redeem the land is a loss of power. (By Panga Ching/Maric)
The Republic of Montenegro (Montenegro) signed a $1 billion loan with China in 2014 to build a north-south highway, and its inability to repay the interest on the loan starting in 2021, coupled with a major setback from Communist pneumonia to tourism, the country’s main source of income, has greatly reduced its ability to repay the loan.
Montenegro, which is in the process of applying for EU membership, turned to the EU for help, but the EU refused, offering to allocate funds from the $10 billion Western Balkans Economic Investment Program to help it finish building the highway.
EU spokesman Peter Stano said on Monday (12) that the EU has been Montenegro’s largest provider of financial assistance, as well as its largest investor and trading partner, stressing that the EU will continue to help Montenegro, but will not help it repay loans from third parties.
Eastern European economist Peter Wang analyzed to the station that Montenegro’s idea of asking the EU for help to assist in repayment is too simple.
Peter Wang said: Montenegro may think too simply to join the EU, Montenegro is not ready to join the EU, he is still far from the EU. If Montenegro and the Chinese Communist Party to carry out such construction of roads, it must not be the EU standard, I think so, at least the Montenegrin standard. If it is a Chinese standard, then why would the EU pay for a Chinese standard highway, then the EU is not a big loser?
According to the agreement signed between China and Montenegro, if Montenegro is unable to repay the loan, China has the right to obtain the land of Montenegro as collateral.
Peter Wang believes that the bigger crisis than the debt is political control. Once Montenegro to pay the debt with land, and can not redeem the land, is a loss of power.
King Peter said: Montenegro is doing itself wrong, should not mortgage the land, should mortgage your gold stock. Mortgaging the land is problematic, mortgaging the land you can only do to buy and sell, unless the deed stipulates how many years the right to use, you give the right to use to buy that is a different matter, you mortgage is the right to use. If you mortgage the land normally, both sides are the same as you mortgage the house, you default on both sides will have to put the house up for auction, the land to be auctioned. The first country in line for auction is Montenegro itself, of course, the EU countries can also buy, the bank decided to sell, in normal terms, Montenegro will have to redeem his country, if Montenegro said I do not buy (redemption) that Montenegro is a loss of power and disgrace.
Montenegro is located in the Balkans, known as the European powder keg. An EU spokesman said the EU is concerned about the possible impact of Chinese investment on socio-economic and financial, and the risk of macroeconomic imbalances and debt dependence.
Montenegro’s debt is expected to be 165 kilometers long, with a Chinese loan of 85 percent. The first 41 kilometers of construction, undertaken by China Road and Bridge Engineering Co., Ltd. will cost nearly $24 million per kilometer, and is therefore described as one of the world’s most expensive highways. A study even said that Montenegro this highway in no economic cost effectiveness to speak of.
Montenegro, with a population of only 620,000, had a foreign debt of more than $4 billion last year, double its gross domestic product GDP. The $1 billion borrowed from China is equivalent to a quarter of the country’s total debt. The new government takes office in December 2020, and the new deputy prime minister, Dritan Abazovic, made a special visit to the EU last month to ask for its help in restructuring Montenegro’s debt. The finance minister confessed that the country’s infrastructure relies on the Chinese Communist Party to such an alarming degree that the International Monetary Fund had concluded that the country could no longer afford to take on any new debt.
In 2020 Tanzania became the first country in Africa to scrap a $10 billion loan agreement with China. China provided the country with a loan to build a port on the condition that it be given a 99-year lease on the port, during which time the country had no right to make any representations to China. in July 2018 Sri Lanka handed over a 99-year lease on the key port of Hambantota and nearby land to the Chinese Communist Party because of its inability to repay the Chinese loan.
While criticized as a new form of colonialism, the Chinese Communist Party’s “One Belt, One Road” has also woken up countries such as Malaysia and Pakistan to cut their loans to the “One Belt, One Road.
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