Serbia to borrow $1bn from UAE for budget support

By bne IntelliNews October 16, 2016

The Serbian government has secured a $1bn loan from the Abu Dhabi Fund for Development (ADFD) to support its budget, state news agency Tanjug reported on October 14.

In 2015, Serbia managed to reduce its budget gap to 3.7% of GDP from 6.6% in 2014, and the country maintained the positive trend in 2016. Serbia’s consolidated budget produced a surplus of RSD8.53bn (€69.29mn) in the first eight months of 2016, swinging from a RSD39.1bn deficit recorded in same period last year, data from the finance ministry showed on September 29. 

The loan agreement with the ADFD was signed on October 4 by First Deputy Prime Minister and Foreign Minister Ivica Dacic. The loan will have an interest rate of 2.25% per year and 10-year maturity period, including a grace period of five years, and the repayment period of five years. 

However, in order to start withdrawing money, the government needs approval from the parliament. It has urgently submitted a draft law on ratification of the loan agreement, which will be on the agenda of the session scheduled for October 25, according to Tanjug. 

The agreement stipulates that Serbia will repay the loan in five installments of up to approximately $200mn, at  intervals of at least six months, Tanjug reported.

In 2015, Serbia’s consolidated budget gap stood at RSD148.6bn and remained below the ceiling envisaged under the precautionary €1.2bn three-year Stand-By Arrangement (SBA) approved by the International Monetary Fund (IMF) in February 2015. The country’s deficit was expected to reach RSD232.1bn, but the IMF decreased the target to RSD162.1bn in November 2015, after the third review of the SBA.

If the current trend continues, the country might again manage to bring the deficit for the whole year below the target envisaged in the budget bill passed by the Serbian parliament on December 12. According to the bill, Serbia plans a budget gap of RSD121.8bn for 2016.

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