North Macedonia’s Prime Minister Hristijan Mickoski announced on December 10 that the government approved a second €500mn loan from Hungary.

The funds will be used to repay a Eurobond issued by the previous government in 2018, which is set to mature on January 25, 2025.

Mickoski explained during an open debate on Macedonian Radio and Television that the loan will ensure that the country meets its repayment obligations without burdening future administrations. “With this loan, we will repay our debt, and any future government will not have the obligation to pay off a Eurobond,” he said.

The newly approved loan is the second part of a broader €1bn agreement with Hungary. The first tranche of €500mn was allocated earlier this year to support companies and local governments. Mickoski highlighted the government’s strategy to delay securing the second tranche until it was needed to avoid incurring unnecessary interest payments, the government said in a statement.

Mickoski noted that the Hungarian loan comes with a favourable interest rate of 3.25%, significantly lower than current market rates.

“If we were to issue a new Eurobond today, countries with much better credit ratings than North Macedonia are securing rates of around 5%. For us, it would likely be no less than 6%. This loan at 3.25% is 2.75% lower than the market rate,” he said, underlining the financial benefits of the deal.

The initial €500mn loan from Hungary sparked controversy as Hungarian media outlets have reported that the country acted as an intermediary for China in securing the loan. Investigative news site Vsquare said that the €500mn loan was part of a larger €1bn package that Hungary secured from a consortium of Chinese banks earlier this year. However, this was denied by Hungarian Prime Minister Viktor Orban, who said the Chinese loan could only be used for projects within Hungary.