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Prime Minister Igor Luksic's interview to Reuters: Montenegro mulls IMF loan, new Eurobond issue

Published date: 25.01.2011 16:35 | Author: Reuters

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Montenegro mulls IMF loan, new Eurobond issue

2011-01-21 13:07:01 GMT (Reuters)

* Montenegro to seek 180 mln eurobond in coming months -PM

* EU candidate country mulling IMF precautionary loan

* Says bank reforms needed ahead of any IMF deal

* Opposes earlier idea for state development bank

By Adam Tanner and Petar Komnenic

PODGORICA, Jan 21 (Reuters) - Montenegro may turn to the IMF for a debut precautionary loan and issue another Eurobond in the next few months, its new prime minister said on Friday, as it seeks new investors abroad to bolster its economic recovery.

Former Finance Minister Igor Luksic, who became premier a month ago, said talks with the International Monetary Fund next month would broach "the possibility to have some sort of back-up precautionary arrangement, which may at the same time help us with access to the capital markets."

Bank sector reforms would need to be in place ahead of any loan deal with the IMF, Luksic told Reuters in an interview -- his first with the foreign media since taking office.

The European Union candidate country known for its scenic Adriatic coastline issued a maiden, five-year 7.875 percent Eurobond last September, selling the entire tranche of 200 million euros.

It is now planning for a new 180 million euro Eurobond, Luksic said.

"We are now discussing the best timing to go to the markets again," he said. Montenegro will "use it to finance the deficit and repay debts, and also to use it for the next year ...because we are already thinking about that."

"I hope we might be able to do it in the next several months, in the first six months," he added. "I think the markets will react positively to the new issue because in the meantime we have kept to our promises."

Montenegro, which split from the rump Yugoslavia in 2006, is also hoping soon to secure an $85 million World Bank loan for budget support. The local World Bank head told Reuters the board would discuss the loan later this month.

"I think it is important to kick-start all of those activities very early in the year to pick the best timing... Last year many countries at a certain point had to give up their (Eurobond) plans or intended issues because of turbulences on the European markets."

In the region, Albania and Montenegro issued planned debut Eurobond issues after delays last year, and Macedonia put off a planned 2010 issue entirely.

LONG DANCE WITH IMF

Elsewhere in the emerging Balkans, Serbia, Bosnia, Kosovo and Macedonia have turned to the IMF for loans since the start of the global financial crisis. Past talks with Montenegro have faltered over the issue of banking reforms, encompassing the largest locally owned bank, Prva Banka, in which the former prime minister's family has a major stake.

"It is dependent on our policies," Luksic said about a possible IMF precautionary loan.

"From the budget point of view we are on track and better than many European countries nowadays.

"At the same time it is the financial sector that we have to keep in order, and I think if the central bank manages to resolve all the issues with regards to the banking sector...that would create the environment that we could possibly talk."

The new prime minister -- at 34 the youngest in the region -- said he did not favour an idea advanced by his deputy prime minister in November to create a state development bank in 2011 if commercial banks do not ease their lending practices.
"I'm not very enthusiastic about that idea," he said. "If there should be a space for a new bank it should be created on the basis of a private-public partnership."

"I would rather look at the possibility of a (state) investment development fund investing 30, 35, 40 percent of their funds into the shares, into the minimum capital required to set up that bank."

Also in 2011, Montenegro hopes to privatise its container operation in the Port of Bar after failing to do so in the past, Luksic said. "I hope that once we have used the EBRD pre-privatisation loan for the container port of Bar we will be able very soon to launch a tender for that," he said. "That is one of the best possibilities we are going to have this year."

(Editing by John Stonestreet)