French Development Agency to lend EUR 60 million for modernization of rail system

The Government of Serbia has submitted to the National Assembly for adoption the Bill on Confirming the Credit Arrangement Between the French Development Agency (AFD) and the Republic of Serbia for the second phase of the project of the modernization of the rail sector in the territory of our country, and the sum amounts to EUR 60 million.

This credit arrangement envisages that Serbia can use all the funds by May 15, 2030 at the latest. As for the interest rate, it is planned for Serbia to be able to choose between a fixed and a variable interest rate within the repayment of each installment – the variable rate is expressed as a six-month EURIBOR plus a margin of 0.65. On the other hand, the fixed interest can be chosen if the amount of the requested withdrawal of funds is higher or equal to a sum of EUR 3 million, in the maximum amount envisaged in this contract.

The contract highlights the articles of the French Law on Consumer Protection and the Code on Money and Finances by which AFD obliges to notify the borrower about the amount of the maximum, that is, global effective interest rate.

– The effective global interest rate (taux effectif global) which applies to the arrangement can be determined on an annual level of 3.11% and an interest period of six months, at a rate of 1.54% - says the agreement, which notes that the maturity date of the credit arrangement is ten years, including a grace period of six years.

When this period expires, the borrower is to pay the lender the principal amount under the arrangement in eight equal semi-annual installments, of which the first one is due on November 15, 2030 and the final on May 15, 2034.

The agreement on the credit arrangement was signed in November last year. The total value of the project of the modernization of the rail sector in Serbia is EUR 120 million, and it has been supported by the International Bank for Reconstruction and Development (IBRD), as reminded in the Bill on Confirming the Credit Arrangement with AFD