Interview of the Minister of Finance, Milorad Katnic, for Reuters

Montenegro may consider new Eurobond in 2012
Montenegro to use $80 million World Bank guarantee for borrowing
Precautionary deal with IMF to be discussed in January

By Aleksandar Vasovic

PODGORICA, Dec 20 (Reuters) - Montenegro may consider launching a new Eurobond in 2012 as part of its efforts to fund its budget and cope with a euro zone economic downturn, its finance minister said in an interview.
The tiny Adriatic country sold two Eurobond tranches worth 380 million euros ($494.68 million)in 2010 and 2011 after splitting peacefully from Serbia in 2006 and unilaterally adopting the euro in 2002 in defiance of the EU and the European Central Bank.
"For a possible new Eurobond we will have to consider the price, in line with market conditions and our needs next year," Milorad Katnic said on Tuesday.
On Monday, Prime Minister Igor Luksic told Reuters Montenegro's growth should reach 2.5 percent next year, but a downward revision may be needed if the worsening debt crisis in the euro zone tips its major trading partner into a contraction.
Montenegro also faces serious problems in its indebted metals industry which could stress its finances.
Meanwhile, the country will maintain its existing 20-year $85 million loan deal with the World Bank and may also consider seeking a precautionary loan deal with the International Monetary fund (IMF), Katnic said.
"We have also agreed to use the World Bank's $80 million guarantee for a commercial loan (Eurobond)... some time in June or July," Katnic said. "The guarantee allows us to seek a loan of between $100 million and 120 million."
Montenegro's public debt is likely to be contained at 45 percent of GDP in 2012 and the country could also seek a precautionary deal with the IMF when the Fund's mission visits in January, Katnic said.
"We proved we can implement some tough reforms including the public sector and pensions. One should have the IMF as a buffer," he said.
Montenegro's draft budget, currently in parliament, set the deficit at about 1.25 percent of GDP. Parliament is expected to approve the budget by the end of December. This year's budget gap stood at 1.95 percent of GDP in September.

ALUMINIUM AND STEEL
In 2012 the country will face fiscal risks because of its indebted aluminium producer and key exporter, the Kombinat Aluminijuma Podgorica (KAP) and the bankrupt steel mill Zeljezara Niksic.
Last year, Montenegro and Russia's EN+ signed an agreement giving the Montenergin government a controlling minority stake in the KAP which has been running losses as global metals prices fell, and the government agreed to guarantee a 135 million euro loan to repay previous loans and pay out redundancies.
Earlier this year Podgorica started talks with creditors on how to ensure financing of the debt, Katnic said. It is also seeking a strategic partner who could secure further financing for the KAP.
"We want to know whether this partner could pay its debt or, if we have to pay it, how we can do it without overburdening ourselves,"
Katnic said," he said. "We want to postpone the activation of guarantees (for the KAP debt) until we finish this."
The government has already started payments of its guarantees for the bankrupt Zeljezara Niksic steel mill over a 193 million euros ($266.3 million) debt. Katnic said Zeljezara's assets should be offered for sale soon.
Montenegro's economy depends heavily on summer tourism along its Adriatic coast and on real estate development which has subsided in recent years amidst the economic crisis.
"However, given the size of the economy, even a single investment of, let's say 100 million euros, could tip the scale in our favor," Katnic said.
In November, Qatari real estate investment company Qatari Diar announced plans for a 250 million euro ($338 million) resort in the coastal town of Tivat, already the site of Canadian billionaire Peter Munk's Porto Montenegro marina complex.
($1 = 0.7682 euros)