Perhaps that is what Milo Djukanovic had in mind when a few years ago he encouraged his supporters claiming that the Montenegrin foreign debt was small and that he personally had tooken care that a part of it be repaid. Even today, with open pride, the president recalls his shrewdness from the time when he was the Prime Minister. "I did what I could and invested all of my energy and knowledge during the last ten years, under continuous threats and blockades. By buying the debt on the secondary market I reduced the foreign debt from $340 million to $170 million and starting with 1997 turned this xenophobic Balkan country towards Europe, Europe we always feared," Djukanovic recently said in an interview for the prestigious Financial Times.
Djukanovic's boasting is apparently confirmed by the report of the National Bank of Montenegro for 1992. Namely, then, the government of Montenegro, presided over by Djukanovic, "bought" a part of Montenegrin debt worth $162 million. However, the calculations with Montenegrin debts are not that simple.
Actually, the [Yugoslav] Federal Central Bank was paid $176 million but "the true payment of debt of Montenegrin customers is $162 million ($158 million via Montenegro Bank in Podgorica and $4 million owed by the shipyard Bijela)" states the report of the National Bank of Montenegro. The difference of $14 million was created as a consequence of "the exchange of bilateral debts and debts of international financial organizations amounting to $55 million for the commercial debts of the National Bank of Yugoslavia amounting to $69 million."
This endeavor of the Montenegrin government and its Prime Minister was motivated by the low price of the Montenegrin foreign debts at the time. This was the time when the standing of the country abroad had already started to wane both in the eyes of the lenders and the rest of the world. That is the origin of the ambition to get rid of debts early and ot tempting prices. Today the whole operation is known as the unsuccessful attempt to buy debts at the tempting price of 24 cent per dollar. There is no need to mention that the National Bank of Yugoslavia, either because its international channels had stopped functioning or because it neglected this Montenegrin financial "strategy" hasn't to this day paid the debt. Or, simply it was impossible to find anyone daring enough to invest into Yugoslav debt at the time.
A month ago Bozidar Gazivoda, at the time the minister of finances, roughly, from memory, had this to say about this transfer: "This is a significant amount that needs to be clarified with the National Bank of Yugoslavia. In the early nineties we transferred about $170 million of debt to the Federation, during the former Yugoslavia. Similarly, there was a $150 million debt buyout. In practice that transaction went through but there is still a dispute with the Naitonal Bank of Yugoslavia regarding this. Therefore, when all of that is added up, one more loan needs to be cleared up with the Yugoslav financial authorities."
But the employees of the National Bank of Montenegro and government officials did not allow to be confused - with the benefit of hindsight the authors of the report written in March 1993 found a way, at least short term, to convert this failure into a success. "We emphasize that out of $158 million of Montenegrin debt, bought back through Montenegro Bank in Podgorica, $145 million represents the debt of Montenegrin customers (debtors) while another $13 million corresponds to the pay back of the loans for the so-called trade subsidies," the report explains. Therefore, Montenegrin companies benefited from this failure of the Montenegrin government.
The times have changed and Belgrade has opted for harmonious relations with the international community, while Podgorica has become increasingly insignificant. And the size of the debt, which dictates the speed and agility with which Belgrade competes with Podgorica in the struggle for donations and good will of potential and true international investors and financial organizations perhaps proves them right.
In the article entitled "Montenegro owes $1 billion", reprinted in mid June by Dan from Blic News, Boris Begovic, the adviser to Miroljub Labus, claims that "the data of the National Bank of Yugoslavia indicate that he undeniable foreign debt that 'belongs' to Montenegro is about $1 billion". If, according to Begovic, the part of Yugoslav debts that Montenegro would take over after independence is added, based on the number of inhabitants, GNP and annual exports, independent Montenegro "would be the hostage of her indebtedness, as independence does not cancel past debts".
In other words, besides her own problems, a possibly independent Serbia does not intend to take upon herself any Montenegrin debts. Especially after the report of the European Stability Initiative from Vienna, which was also published in Monitor, stating that "the inability of Montenegro to come to terms with her own lack of money can create serious problems regardless of whether she becomes independent or not. Montenegrin institutions are not sufficiently efficient to function in an independent European state, nor in the case of the survival of a federal state or a confederation."
There is no need to emphasize that we must escape FR Yugoslavia. Partly because she is currently the most indebted country in Europe. Her external debt, based on the accounts of experts from the recently held Donor Conference in Brussels, is 136 percent of her GNP from 2000.
But, how to escape oneself? If the data offered by the National Bank of Yugoslavia are reliable, the ratio of external debts to GNP would be even worse in the case of independent Montenegro. And while the Montenegrin authorities are conspicuously keeping silent about the ways and likelihood of escaping this debtor's bind, Montenegro could start her "independence", with Serbia right behind, as the most indebted country in Europe.
Therefore Montenegro was already indebted in the early nineties, so that Ante Markovic, the last Prime Minister of the former Yugoslavia transferred to the federal level about $160-170 million of that Montenegrin debt. "I helped Montenegro more than a Russian emperor," Markovic allegedly said before Montenegro finally pushed him out of her overburdened heart. That was the last successful action with the goal of reducing Montenegrin debt burden.
In early 1992 Milo Djukanovic's government initiated the next attempt to reduce debts. Then, according to the report of the National Bank of Montenegro for 1992, between January and May, with purchases on the secondary market the Montenegrin debt was reduced from $522 million in 1991 to $360 million. Namely, the National Bank of Montenegro transferred to the National Bank of Yugoslavia obligations amounting to $162 million and "paid" $176 million for this service even though it was never actually carried out. This transaction failed as the National Bank of Yugoslavia to date has not paid back this part of the Montenegrin debt. That was the last organized attempt to do something to reduce Montenegrin indebtedness.
After the suspension of sanctions in 1994 Montenegrin shipping companies were "forced" to reduce their indebtedness, on the account of their fleet, by ceding their ships to their agile lenders. But the increase in Montenegrin indebtedness did not stop. The growth of the debt since 1990 is mostly due to unpaid interest that averaged 7 percent, so that only on that basis the debt from 1990 probably doubled in the last ten years.
After the sanctions, however, the new loans kept coming. The Aluminum Company (KAP) played a prominent role in increasing Montenegrin foreign debts by $184 million. If one adds to that "old" [pre-war] foreign currency savings [guaranteed by the state], which in 1992 amounted to roughly $150 million, the $40 million debt to the National Bank of Yugoslavia, a loan for the unsuccessful salvation of the Montenegrin ocean fleet, and new loans for the thermal power plant "Pljevlja" from the Russian loan whose new installments are still coming, the German loan for the regional waterworks, loan for the airplanes of the Montenegrin national air carrier, loan taken by the Bar sea port for the building of a new wave barrier etc. Montenegrin debts become worrisome indeed.
It is difficult to ignore the impression that $1 billion has already been surpassed and that every failure to immediately resolve this problem leads Montenegro only deeper into the abyss.