SERBIA: Serbia will continue its tight fiscal policy to secure new IMF loan, says deputy PM

Record ID: 785281

  • Title: SERBIA: Serbia will continue its tight fiscal policy to secure new IMF loan, says deputy PM
  • Date: 12th August 2011
  • Summary: MAN TAKING MONEY FROM CASH MACHINE BRANCH OFFICE OF "KOMERCIJALNA BANKA" WOMAN TAKING MONEY FROM CASH MACHINE MAN APPROACHING CASH MACHINE, TAKING MONEY HAND TAKING MONEY (SOUNDBITE) (Serbian) ECONOMIST FROM CENTRE FOR NEW POLITICS, GORAN NIKOLIC, SAYING: "The financial crisis will have an impact because Serbia will face two problems. On the one hand the export to main trade countries, Western Europe and neighbouring countries will drop or at least slow down, less hard currency income and on the other hand, banks in Serbia are mostly banks from the EU countries, and banks will face a shortage of funds for investments." PEOPLE ON STREET PRICE TAGS ON SHOP WINDOWS READING IN SERBIAN "ALL FOR 1500 DINARS", "ALL FOR 1000 DINARS", "ALL FOR 500 DINARS", "ALL FOR 300 DINARS" (SOUNDBITE) (Serbian) ECONOMIST FROM CENTRE FOR NEW POLITICS, GORAN NIKOLIC, SAYING: "Well, I think that the Serbian government has little options, I would even say, that it would be very difficult to stick to the present budget deficit, I think it will be bigger, because income tax is less than planned, government spending is higher than planned, and GDP is growing slower than we expected." PEOPLE ON STREET CARS ON ROAD BELGRADE CENTRE/TRAFFIC LIGHT
  • Embargoed: 27th August 2011 13:00
  • Keywords:
  • Location: Serbia, Serbia
  • Country: Serbia
  • Topics: Business,Economy,Politics
  • Reuters ID: LVAD0NPNISVWWTDHOFMV6VHH1G31
  • Story Text: Serbia will continue with its tight fiscal policy despite the ongoing euro zone crisis, the country's Deputy Prime Minister Bozidar Djelic told Reuters in an interview on Thursday (August 11).
    "There is no direct connection between the international fiscal system and especially U.S. and Serbian, but Serbia is in Europe, almost all banks in Serbia are coming from Euro zone. We are very connected, concerning export with European countries, so everything which has been going on in Greece, Italy, Germany, is very important for us," said Djelic.
    He said the former Yugoslav republic would start talks with the International Monetary Fund later this month, aiming to secure a loan of around one billion Euros as early as October.
    "We confirmed that we will not exceed a budget deficit of 4.1 percent this year, and we will continue rules of fiscal responsibility according to the budget law. Also we will propose a budget with a deficit of 3.2 percent of domestic GDP for the next year," Djelic said a day after Serbia's Prime Minister Mirko Cvetkovic held an urgent meeting of his ministers and central bank officials after Serbia's main index BELEX15 dropped 7.1 percent, the most since October 2008.
    Serbia's central bank, citing the uncertain impact of the current global economic instability, did not cut interest rates as expected on Thursday. Djelic said an IMF delegation was due to visit Belgrade on August. 18, and said Belgrade hoped to conclude a stand-by deal of about a billion euros.
    Serbia's previous 3 billion euro stand-by arrangement with the IMF expired this year.
    "Of course, to secure credibility of those measures, on August 18 when the IMF delegation arrives, we will start negotiations in autumn to conclude a new programme with this institution, which will show to our citizens, and our businessmen and international investors and international community, that Serbia will have a very responsible policy," Djelic said.
    Serbia is now preparing a debut Eurobond, seen in the range of about 700 million euros, following other emerging Balkan countries, including Montenegro, Albania and Macedonia, that have issued Eurobonds in recent years.
    Djelic said Serbia's foreign direct investment (FDI) was up 26 percent in the first five months of the year to $684 million.
    Switching to euros, he said he hoped the country would lure FDI of between 1.5 billion and 2 billion euros for all of 2011, rebounding from 2010 when it fell to 860 million euros, according to a central bank estimate, from 1.37 billion euros in 2009.
    But Goran Nikolic, an economist from Centre for New Politics, thinks that Serbia would face two big challenges because of the European financial crisis.
    "The financial crisis will have an impact because Serbia will face two problems. On the one hand the export to main trade countries, Western Europe and neighbouring countries will drop or at least slow down, less hard currency income and on the other hand, banks in Serbia are mostly banks from the EU countries, and banks will face a shortage of funds for investments," Nikolic said.
    "Well, I think that the Serbian government has little options, I would even say, that it would be very difficult to stick to the present budget deficit, I think it will be bigger, because income tax is less than planned, government spending is higher than planned, and GDP is growing slower than we expected," Nikolic added.
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