Montenegro said it repaid $40.5 million (37.2 million euro) to China's Exim Bank to cover the sixth instalment of a loan extended for the construction of the Bar-Boljare motorway.

Thanks to a hedging arrangement signed last week, Montenegro managed to save 3.6 million euro ($3.9 million) from the payment of the instalment, the finance ministry said in a statement on Friday.

The instalment was due on January 21, which was a non-working day, therefore the ministry transferred the money on January 19. Out of the total amount, $32.78 million went for the principal and $7.71 million for the interest on the loan.

With the latest money transfer, Montenegro had so far repaid $157.67 million in principal and $91.72 million in interest on the Exim Bank loan. As a result, its outstanding debt to the Chinese lender totals $721.28 million, or 663.57 million euro, according to the average exchange rate agreed with the hedging banks.

The finance ministry said it signed the hedging arrangement as a cross-currency swap with four European and U.S. banks on January 17. The transaction covers the conversion of the entire $754.07 million Chinese loan at an average euro/dollar exchange rate of 1.087. It is valid until the maturity of the loan in 2035, with an option to revise the terms of the deal in two years.

The instrument helped cut the interest rate on the loan from 2% to 0.98%, the finance ministry said.

In October 2014, Exim Bank signed an agreement to extend a $944 million loan to Montenegro, with an interest rate of 2% and a six-year grace period, for the implementation of the Bar-Boljare project. The construction of the motorway started in May 2015, when China Road and Bridge Corporation (CRBC) launched works on the first priority section of the motorway - the 41-km Smokovac-Matesevo stretch.

In July 2022, Montenegro opened the Smokovac-Matesevo section. The 129-km motorway has three more projected sections - Matesevo-Andrijevica, Andrijevica-Boljare and Podgorica-Djurmani, which are yet to be built.

The Bar-Boljare motorway will link Montenegro's Adriatic port of Bar to the country's border with Serbia in the north. It is part of European transport Corridor XI, a ferry/motorway corridor linking Italy's Bari to Romania's Bucharest via the port of Bar and Serbia's Belgrade.