BELGRADE – Serbia could be in the market to borrow up to $3.0 billion in the next three years to complete the highway between its borders with Hungary and the Former Yugoslav Republic of Macedonia (FYROM), a government source told Reuters yesterday. The coalition led by Prime Minister Vojislav Kostunica has yet to work out details of the plan, designed to speed up the construction of Serbian stretches of the E-75 highway, which runs from Poland’s port of Gdansk to Athens. Some in the cabinet favor granting a road-building concession, while others oppose it as a potential fiscal risk. The source added the borrowing would not put undue pressure on Serbia’s external debt-to-GDP ratio, currently 30 percent. «If Serbia were to finance these two stretches of the highway on its own, it would take seven to eight years to complete the work,» the source said. «The cost of the works would be between $2 billion and $3 billion and the government could borrow $1 billion a year without building up excessive external debt,» the source added. The World Bank and the European Investment Bank have already expressed interest in lending for the road and rail network. «The government will also consider other options, including commercial borrowing both in Serbia and abroad. It all depends on the price. One of the options is to raise part of the funds through a domestic bond issue,» the source said. The size of the borrowing would also depend on how much Serbia earns from privatizations this year and next. Uncertainty over the future of Serbia’s breakaway province of Kosovo – which demands independence – and the possibility of ultranationalists making a strong showing in presidential elections in 2008 are seen as putting off some investors. The government expects no more than $3 billion in foreign direct investment this year. Another issue is which entity would borrow the money. «They would like to borrow through Putevi Srbije (the state-run road-building and road-operating company) and provide necessary guarantees,» the source said. «But Putevi Srbije runs some $300 million in debts and needs financial consolidation before it can borrow again,» he said. Local media quoted Economy Minister Mladjan Dinkic as saying the government would work out a detailed plan for all missing stretches along the pan-European Corridor 10, which also include road links to Bulgaria and a ring road in Belgrade. The government was due to sign a 60-million-euro loan deal with the European Investment Bank later yesterday that would part-finance the Belgrade ring road.