Montenegro is strategically building a refinancing reserve as it approaches a substantial sovereign maturity wall in 2027, with an estimated refinancing requirement between €1.17 billion and €1.2 billion. The country’s public debt remains stable relative to its GDP, but the government is increasingly focused on the timing of financing rather than just the overall debt ratio. Recent efforts have included reducing gross debt and extending the maturity profile while accumulating deposits.
As of March 2026, gross public debt was recorded at €5.13 billion, amounting to 59.9 percent of projected GDP. The central government debt specifically reached €5.11 billion, or 59.6 percent of GDP, based on a Ministry of Finance projection that estimates GDP at €8.56 billion for 2026.
During the first quarter, the gross public-debt stock decreased by nearly €55 million. However, a more detailed analysis reveals that government deposits fell by €154.3 million to €650.5 million, which includes about €154.4 million held in gold. This decline in deposits outpaced the reduction in gross liabilities, resulting in an increase in net public debt by almost €100 million to €4.48 billion, or 52.3 percent of GDP.
The distinction between gross and net debt becomes crucial as Montenegro prepares for future maturities. New borrowing may lead to a higher gross debt figure, even if the funds are retained in government deposits, thus mitigating immediate refinancing risks. The government anticipates that the gross debt ratio could temporarily rise to around 68 percent of GDP in 2026, primarily due to reserve accumulation for upcoming obligations rather than increased net spending.
The composition of Montenegro’s debt portfolio is predominantly external, with foreign liabilities totaling €4.80 billion, representing 94.1 percent of central government debt and 56.1 percent of GDP. Domestic debt is comparatively low at just €302.6 million, or 5.9 percent of the total portfolio.
The largest segment of this external debt consists of international bonds, valued at €2.79 billion, which constitutes 32.5 percent of GDP. Montenegro’s reliance on international capital markets remains significant, although multilateral and bilateral lenders also contribute notably to specific projects.
The repayment schedule includes four key external bonds: a €750 million Eurobond issued in 2020, maturing in December 2027; a €500 million bond maturing in October 2029; a dollar bond from 2024 worth €750 million, which matures in March 2031; and an €850 million seven-year Eurobond issued in March 2025, maturing in April 2032.
The 2025 Eurobond was issued with a coupon rate of 4.875 percent, nearly one percentage point lower than previous international bond costs, allowing for refinancing of liabilities due that year while extending repayment timelines into the next decade.
A subsequent financing move involved a €450 million syndicated loan, arranged in late 2025 to bolster fiscal reserves, with participating lenders including Merrill Lynch International and Société Générale among others. This five-year facility is priced at six-month Euribor plus 250 basis points, leading to an initial all-in rate close to 4.5 percent.
The structure of Montenegro’s debt indicates that fixed-rate instruments comprise 79.1 percent of central government obligations, while variable-rate liabilities account for 20.9 percent. The latter are primarily linked to Euribor rates, which could see costs decrease if eurozone benchmark rates fall.
Currencies used within the debt portfolio are predominantly euros, minimizing currency risk; approximately 99.74 percent is euro-denominated, with minimal exposure to dollars and SDRs. This structure includes cross-currency swaps related to loans from China Exim Bank for infrastructure projects and dollar-denominated bonds.
The largest individual project liability remains a loan from China Exim Bank at €543.1 million, equivalent to approximately 6.3 percent of GDP. Additionally, multilateral debts are spread across various institutions, including obligations totaling €247.5 million to the International Bank for Reconstruction and Development.
The domestic portfolio mainly consists of commercial bank loans and domestic government bonds totaling around €107.6 million. A recent domestic bond matured shortly after the reporting period, while two retail and corporate bonds issued previously are set to mature in November 2027.
Borrowing activity during the first quarter was limited; Montenegro entered no new loan agreements and withdrew only €18 million from existing contracts, primarily for defense and development projects.
Total principal repayments reached approximately €69.8 million during this period, with interest payments slightly higher at around €71.8 million , leading to total debt service costs nearing €141.6 million for the quarter.
The budget for 2026 has allocated up to €710 million for both debt repayment and capital expenditures, with plans for new borrowing potentially reaching up to an additional €500 million combined with accumulated deposits from 2025.
The Montenegrin government has authorized up to an additional €1 billion for pre-financing obligations due in 2027 and 2028, aimed at reducing liquidity risks associated with upcoming Eurobond repayments while acknowledging potential negative carry implications.
The state-guaranteed debt remains moderate at around €116 million or about 1.4 percent of GDP as of March’s end, with recent guarantees issued supporting infrastructure investments critical for national development.
The country’s credit ratings stand at Ba3 from Moody’s and B+ from S&P with positive outlooks reflecting growth prospects and progress towards EU accession despite remaining below investment grade.
This financial landscape highlights Montenegro’s vulnerabilities linked to its narrow domestic capital market and large bullet maturities while emphasizing the importance of external investor confidence amidst rising gross debt levels and interest expenses associated with pre-funded cash reserves.
