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Serbia secures new loans for Ruma-Šabac-Loznica road construction amid rising costs

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Serbia has announced new borrowing to fund the construction of the Ruma-Šabac-Loznica road, securing two separate loans totaling 15 billion dinars (approximately 127.2 million euros) from Bank Intesa and 11.7 billion dinars (about 99.15 million euros) from Unicredit banks. This marks the third time Serbia has borrowed the same amount from Bank Intesa for this project, with previous loans obtained in 2023 and 2021.

The cost of the project has escalated by nearly 90 million euros since the last official estimates published by authorities last year.

Contracts for these loans were signed on June 13 and 14 of this year, pending approval by Parliament to come into effect. The 15 billion dinar loan from Bank Intesa will be repaid in biannual installments over the next decade, with an interest rate of three-month BELIBOR plus a fixed margin of 3.05 percent annually. Fees include a 0.3 percent loan approval fee on the total amount, along with a semiannual 0.3 percent charge on any unused funds.

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Meanwhile, the 11.7 billion dinar loan from Unicredit Bank carries a nine-year repayment term in biannual installments, with an interest rate set at BELIBOR plus a fixed margin of 2.9 percent per year. Fees here include a 0.3 percent processing fee on the loan amount and an annual 0.35 percent charge on unused funds.

Both contracts allow for early repayment if deemed advantageous for managing public debt, subject to a 1.5 percent fee on the amount repaid prematurely.

The draft law accompanying these loans underscores the strategic importance of the Ruma-Šabac highway and Šabac-Loznica expressway, crucial for linking and developing the regions of Mačva and Srem, home to approximately 600,000 residents.

The project’s initiation dates back to August 9, 2018, with the formation of a Working Group aimed at collaborating with AzVirt, a key player in defining the financing structure. Following negotiations in 2019, a Commercial Contract was signed in November that year involving the Serbian government, Public Enterprise “Roads of Serbia,” Koridori Srbije doo, and AzVirt. The agreed project cost, including technical documentation and execution, stands at up to 467.5 million euros.

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