The Serb Republic, political entity of Bosnia and Herzegovina, has signed €180m ($227m) deal with a group of companies to construct 36km section on the Banja Luka-Doboj motorway to improve the transport link in the Balkan country.

The Republic will construct the stretch between Prnjavor and Doboj towns, as a part of the 75km motorway that links Banja Luka with the Bosnian section of the pan-European highway, Corridor VC, in Doboj.

The project is expected to improve the transportation link in the region and also bring economic development.

Serb Republic Prime Minister Aleksandar Dzombic was quoted by Reuters as saying that the European Bank for Reconstruction and Development has extended a loan of €150m ($187.5m) for the project whereas the remaining €30m ($37.5m) will be contributed by The Serb Republic.

"This is one of the largest strategic projects in Republika Srpska (Serb Republic)," Dzombic added.

The construction work on the section of the motorway is expected to begin in September 2012.

The country has about 60km of highway and transport links, which is hindering the economic development of the region and foreign investments.

The government is also planning to secure another loan of €200m ($250m) from the European Investment Bank for the construction of the western segment of the motorway, according to Reuters.

The new segment construction will connect the towns of Prnjavor and Banja Luka.