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Montenegro secures €40 million grant from European Investment Bank for railway infrastructure enhancement

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The Ministry of Transport and Maritime Affairs is set to finalize a grant agreement with the European Investment Bank (EIB) aimed at enhancing railway infrastructure and upgrading depots and workshops for maintaining railway vehicles, with a total funding of €40 million.

This decision was approved by the government during its recent session. The government greenlighted the Grant Agreement for the East-Mediterranean Rail Corridor: Railway Interconnection R4 Montenegro – Serbia, specifically the Bar – Vrbnica section in Montenegro, between Montenegro and the European Investment Bank. Additionally, the Agreement on the Transfer of Grant Funds from the Western Balkans Investment Framework was approved between the Government of Montenegro and the Montenegrin Railways Infrastructure.

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The Ministry of Transport and Maritime Affairs has emerged as a significant beneficiary of non-repayable funds from EU sources in the transportation sector. Notably, applications were submitted under the third and fifth calls for project proposals to secure funds for initiatives aimed at removing speed limitations, improving infrastructure reliability, reducing maintenance costs, enhancing safety across a 20 km railway stretch, and bolstering capacity for modern maintenance of locomotives and wagons.

The grant of €15,765,826 approved on December 6, 2018, encompasses the rehabilitation of 3 steel bridges, upgrades to 20 km of railway track on the Lutovo – Bratonožići – Bioče route, and modernization of depots and workshops for maintaining railway vehicles. Similarly, the grant of €19,705,000 approved on December 10, 2020, is allocated for rehabilitating 10 steel bridges and 8 tunnels.

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During the initial application phase for the investment grant under the third call, the German Development Bank (KfW) and the European Investment Bank (EIB) were the primary financial supporters for distinct projects. However, due to a policy shift at KfW bank, which discontinued its support for Montenegro’s transportation sector, there was a delay in transitioning to a new leading institution for the project.

In response, discussions were held with the EIB on May 17, 2021, culminating in the bank’s expressed interest in assuming the financial obligations previously held by KfW bank. Consequently, the EIB proposed consolidating the €14 million KfW loan and the €18 million EIB loan into a single activity, totaling €32,000,000.

To accommodate this, the Budget Law of Montenegro for 2023 permits state borrowing from the European Investment Bank for projects related to railway infrastructure, including track overhauls, bridge and tunnel rehabilitations, and workshop modernizations, up to a maximum of €32 million.

Given the nature of these infrastructure projects and their significance for Montenegro’s transportation sector, the Competition Protection Agency has endorsed the loan arrangement with the EIB, affirming its compliance with state aid regulations.

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