Serbia’s public sector employment is expected to be reduced by an additional 6,500 staff in the second half of 2016, the International Monetary Fund (IMF) said in its Serbia country report published on September 2. By end-March, public sector employment (including local public utilities) had been reduced by more than 16,000 employees relative to end-2014.
Serbia's large public sector workforce represents one of the major risks for country’s sustainable financial stability, but cutting employee numbers is the main risk for political and social stability. The IMF has been an important partner for the government in implementing reforms following the precautionary €1.2bn three-year stand-by arrangement (SBA) approved in February 2015.
The IMF said that rightsizing efforts will continue in 2017, particularly in the areas of education and health, but will be more targeted and developed in conjunction with World Bank functional analyses.
“Staff and the authorities agreed that this targeted separation approach will aim at containing the still high wage bill (as a share of GDP) through streamlining noncore administrative staff and improving efficiency of service deliveries,” the Fund said in its latest Serbia country report.
"Efforts to improve monitoring are advancing and reporting time lags are being reduced. Adoption of the Law on Wages in February 2016—which mapped government wages to a simplified job catalogue—sets the stage for reduced disparities of pay for similar work across different ministries and prevents ad hoc wage increases across sectors. Staff urged the authorities to advance secondary legislation to ensure the new system can come into effect on January 1, 2017."
The Serbian parliament adopted a draft law on public wages, which will regulate the wages of around half a million people employed within the state sector, on February 29, local media reported. The new law was a condition for the World Bank to approve a $75mn loan to the government for public sector reform.
Serbia's unemployment rate shrank to 15.2% in the second quarter of 2016, after it jumped to 19% in the first quarter, up from 17.7% recorded in the fourth quarter of 2015, the statistics office announced on August 31 in its labour force survey (LFS) for April-June 2016.
According to the IMF, to preserve fiscal gains, the authorities are committed to taking action on several fronts including reducing the wage bill as well as state-owned enterprise restructuring and resolution.
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