Montenegro has amended the financing agreement for the Mateševo–Andrijevica motorway section, allowing €147.4 million of the European Union’s €150 million support package to be allocated directly for construction. This adjustment includes a €2 million fee for the European Bank for Reconstruction and Development (EBRD) and €600,000 designated for technical assistance. While this change is minor in relation to the overall project budget, it highlights a significant concern regarding the financing structure, as the awarded design-and-build contract of €693.97 million is nearly double the combined EU construction grant and EBRD loan, placing Montenegro responsible for approximately half of the core construction costs before accounting for additional expenses.
The total EU allocation remains unchanged at €150 million, with €147.4 million earmarked for investment, €600,000 for technical assistance, and €2 million for EBRD fund administration. The amendment was necessary because the EBRD’s management fee was not included in the original grant agreement calculations, indicating an accounting adjustment rather than a decrease in EU support for Montenegro’s largest transport initiative.
This funding package is significant as it represents the largest EU grant awarded to Montenegro for a single infrastructure project. Initially set at €100 million, it was later increased by an additional €50 million, resulting in a substantial non-repayable component compared to previous motorway financing efforts in Montenegro.
The selected contractor, the POWERCHINA–STECOL–PCCD consortium, secured the contract with a bid of €693,969,668.88 excluding VAT. Competing offers were higher, with Cengiz–Azvirt bidding €735.01 million and China Communications Construction Company at €724.64 million. The winning bid was approximately €30.7 million lower than the second-lowest offer and over €41 million below the highest qualifying proposal.
When comparing the revised EU grant of €147.4 million against the signed construction contract value, it covers roughly 21.2% of total costs. Additionally, an EBRD sovereign loan of up to €200 million contributes another 28.8%, bringing direct financing sources to a total of €347.4 million or about 50.1% of the contract value.
The remaining funding gap amounts to approximately €346.6 million or 49.9%, which Montenegro will need to address through its own resources. However, given that Montenegro operates with a fiscal deficit and regularly engages with capital markets, contributions from its budget will still factor into broader sovereign financing requirements.
As of early 2026, Montenegro’s gross public debt was reported at €5.13 billion or 59.9% of GDP, with expectations that it could rise to around 68% by year-end due to pre-financing obligations due in 2027. The government anticipates reducing this figure back down to about 59.9% by 2029.
The importance of concessional and grant financing is underscored by these figures; every euro from the EU grant alleviates potential borrowing needs and reduces future interest expenses associated with sovereign debt. The EBRD loan is structured into two tranches of €100 million each, with the first committed upon signing and the second contingent on satisfactory project progress expected around 2028.
The motorway project spans approximately 22-23 kilometers and features complex engineering challenges including a 3.6 km tunnel and multiple bridges totaling around 4.8 km in length. The accepted construction price suggests a cost between €30 million and €31.5 million per kilometer, significantly higher than previous motorway projects in Montenegro.
In terms of supervision, Italy’s IRD Engineering has been contracted for oversight at a cost of €14.45 million over a period of 90 months, further elevating the total identified contract envelope above €708 million before considering VAT and other related expenditures.
Despite reallocating funds away from direct construction support, this adjustment represents only about 0.4% of the main works contract value and should not significantly impact overall affordability for Montenegro. Key financial risks remain tied to construction price discipline, potential design changes, geological challenges, and claims under FIDIC contract conditions.
Montenegro’s current credit ratings from S&P (B+ with positive outlook) and Moody’s (Ba3 with positive outlook) reflect improvements in fiscal management and macroeconomic stability but still indicate that Montenegro remains below investment grade.
The ongoing motorway development is crucial not only for enhancing domestic infrastructure but also plays a strategic role in connecting Montenegro more effectively with regional markets via the Bar–Boljare motorway route linked to broader European transport corridors.
