Road to nowhere: World’s most expensive highway is a debt-trap for Montenegro

Planned nearly a decade ago as part of a billion-dollar Belt and Road Initiative (BRI) project and built by the China Road and Bridge Corporation (CRBC), the Bar-Boljare highway was supposed to bring in a transformative connection between the Adriatic Sea and Belgrade. It was meant to boost trade, connectivity and tourism for the small mountainous country of Montenegro.

But, all that the ambitious road project has done is to immerse Montenegro in insurmountable debt, since it was built with the help of a loan by the Export-Import Bank of China. The controversial project has not only polarized the country but put Montenegro in what seems to be a debt-trap, according to a report by The Diplomat.

A small section of the “world’s most expensive road” – 41 kilometres from Smokovac to Matesevo out of a planned total length of 165 km – is open now just outside the Montenegrin capital of Podgorica.

The multilane road traverses rugged mountain terrain with an impressive series of tunnels and bridges in just under an hour, but then abruptly ends. There are few drivers on the road because of the expensive toll to take it for such a short distance. After exiting, it is back to dusty and bumpy roads, leaving drivers reminded of the past before the highway was built.

Despite its immense expense, it has significantly changed the time it takes to drive across this short but perilous section of the country, which used to take hours, and has contributed to a reduction in dangerous driving conditions on older, poorly maintained roads, enhancing overall road safety.

Road safety happens to be a major issue in Montenegro. The country boats of one of the highest traffic fatality rates in Europe.

Economic dilemma

A decade ago, Montenegro was one of the first countries in Europe to attach itself to China’s ambitious Belt and Road Initiative (BRI), keen to access ready funding for infrastructure.

However, the Chinese loan incurred for the highway has left the country in debt and nearly resulted in economic collapse, until Montenegro received restructured financing relief from European and US banks.

It is believed that the debts totalled to more than a third of the government’s annual budget.

According to a 2023 US State Department report: “Montenegro has one of the highest public debt-to-GDP ratios in the region.” And “[t]he completion of the full four-stage project continues to pose challenges to Montenegro’s fiscal position, given limited room to finance the construction of the three remaining sections.”

Montenegro is not alone in this debt crisis, other BRI members have struggled to manage the loans issued under the Belt and Road framework. According to Euronews, Argentina, Ethiopia, Kenya, Malaysia, Montenegro, Pakistan, and Tanzania are all dealing with extreme debt-to-GDP ratios that force crippling decisions in order to service the debt.

In comments to Balkan Insight in 2022, Dejan Milovac, from the prominent watchdog MANS, characterized the project as lacking transparency.

“Even though the first section is finally finished, after almost seven years, we still do not have detailed and reliable information on how much the project cost and what the reasons for the delays were. We are also not informed whether the state adequately protected the public interest in the deal with the Chinese investors,” Milovac told Balkan Insight.

It has also been reported that the “2014 loan agreement with the Export-Import Bank of China has been made public, but nearly all other documents relating to the highway have been classified as secret by Podgorica, which many experts believe is due to binding clauses in the Chinese contracts.”

Heavy Environmental Damage

Apart from the financial burden, the project has enacted a heavy cost from the 78-kilometer long UNESCO-protected Tara River Gorge. Environmental experts in Montenegro have deemed the river “effectively dead.”

Since the highway was built nearby, the fish have disappeared. Locals blame poisoning of the water supply by Chinese workers dumping materials into the river. Construction debris from CRBC, the Chinese construction company, are left strewn along the Tara’s banks, and the once pristine water is now full of debris from dump sites and sediments, which are flushed into the river, destroying it. It’s not clear how the government plans to revitalize the river.

For years, activists had warned of the toll construction and pollution were taking on the Tara River. In 2021, Montenegro launched the first state investigation into CRBC concerning the environmental damage to the UNESCO-protected river. Activist groups’ concerns and Montenegro’s Nature and Environmental Protection Agency (NEPA) were repeatedly ignored by CRBC. Later, criminal charges were brought, but were dismissed.

After sour experiences with BRI infrastructure projects 10 years on, many countries have shied away from taking on new Chinese projects. But in March 2023, Montenegro awarded new road contracts to Chinese firms for a coastal highway between the main tourism centers from Budva to Tivat.

The Chinese workers who lived on site for years have gone home now that the first section is done. But, Montenegro is left with the bill from the previous government and uncertainty, as to whether the remaining sections of the road will ever be built in the near future.