Serbia is not under threat of bankruptcy but should reduce rising fiscal gap – World Bank

By bne IntelliNews May 28, 2013

Serbia is not close to bankruptcy since it has foreign exchange reserves and will be able to finance its liabilities but the positive attitude of international creditors towards it might alter if the minus in the budget continues to rise, the World Bank’s country manager for Serbia, Loup Brefort, told state TV broadcaster RTS.

Brefort said the World Bank is concerned about the current trend in the public finances and will encourage the government to implement savings measures already in June. The government needs to act fast in order to as soon as possible see the results of these measures and avoid the scenario of this year’s fiscal gap reaching beyond 8% of GDP as recently predicted by the IMF if no consolidation measures are undertaken.

The cabinet in Belgrade is preparing to revise this year’s budget, which targets a 3.6%/GDP deficit, after Jan-Apr data showed the consolidated fiscal gap already reached 45% of the full-year plan. Finance minister Mladjan Dinkic said earlier in May lower than planned VAT and excise revenue will most likely push this year’s budget gap up to 4.5%/GDP. The government might therefore revise its budget bill already in the next month and a half and not in September as initially planned, he added.

Brefort said that since Serbia has no room to act on the revenue side, all tools to reign in the deficit are on the expenditure side – bringing wages and pensions under control, cutting subsidies and introducing better efficiency in other costs.

Reducing pensions and public salaries will not save the budget but considering these two items make 50% of the expenditure, there is no way to escape them when targeting to cut the deficit, Brefort added. This could be part of the measures that would bring the deficit to a sustainable level. The World Bank has also proposed that Serb municipalities take over part of this financial discipline so that the size of salaries, the number of public sector employees and the subsidies to state firms are controlled at local governments’ level.

Government members already signaled they are ready to freeze public salaries and wages by the end of the year and not raise them by 2% in October as initially planned. Salaries and pensions were already hiked by 2% as on May 2013. Independent experts consider these expenditures should be left unchanged next year as well, or their rise in full 2014 should be no more than 2%. The cabinet is due to announce its savings plan in the coming days.

Related Articles

Former Kosovan premier Ramush Haradinaj arrested in France on Serbia’s warrant

Ramush Haradinaj, a former Kosovan prime minister and the leader of the opposition Alliance for the Future of Kosovo (AAK),  has been taken into police custody in France on a Serbian arrest ... more

China’s Hesteel Group to invest $120mn in Serbia’s Smederevo steel mill

China's Hesteel Group, which acquired Serbia’s only steel mill in July, will invest $120mn in the Serbian company in 2017, ... more

Belgrade Stock Exchange joins SEE Link platform

The Belgrade Stock Exchange (BELEX) has become an active member of the regional SEE Link network, SEE Link announced on December 5. SEE Link is a project started by the Bulgarian, Macedonian and ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss