Governor: Serbia needs plan to reduce public debt

National Bank of Serbia (NBS) Governor Dejan Soskic says Serbia's public debt is around the limit defined by the Budget System Law of 45 percent of the GDP. "Of course, this does not mean the threshold cannot be surpassed - it can be, but only in the short term and with the obligation of forming a very serious plan to bring the debt back within the defined boundaries," he told Tanjug. Governor: Serbia needs plan to reduce public debt "This is something our country needs to do in the coming period, it is part of the Budget System Law, and we sometimes forget that the solution to the problems of a country like ours cannot be to keep increasing the public debt," the governor said. According to him, accelerated growth of the public debt would sooner or later be punished by the market, i.e. the market would determine that Serbia's public debt requires a higher interest rate. Soskic noted that a public debt financed from more expensive sources results in higher annual payments and "if this is reflected in the exchange rate, as a consequence of waning confidence in our country, the foreign exchange component of our public debt will grow further compared to the GDP." "We started several years ago with a public debt to GDP ratio of under 30 percent, and now we have practically hit the limit of what is allowed under the Budget System Law," he explained. "Legally, this means we need to react very seriously and without delay, and I believe we as a country will have the strength to do this in time," added the governor. He expressed expectation that if the budget balancing bill was passed soon and the International Monetary Fund (IMF) gave a positive review of Serbia's arrangement, and adding to this EU candidate status, Serbia's risk perception would start to shift in a positive direction and the situation would stabilize in the mid- and long-term. Dejan Soskic (Tanjug, file) Tanjug

Governor: Serbia needs plan to reduce public debt

"This is something our country needs to do in the coming period, it is part of the Budget System Law, and we sometimes forget that the solution to the problems of a country like ours cannot be to keep increasing the public debt," the governor said.

According to him, accelerated growth of the public debt would sooner or later be punished by the market, i.e. the market would determine that Serbia's public debt requires a higher interest rate.

Šoškić noted that a public debt financed from more expensive sources results in higher annual payments and "if this is reflected in the exchange rate, as a consequence of waning confidence in our country, the foreign exchange component of our public debt will grow further compared to the GDP."

"We started several years ago with a public debt to GDP ratio of under 30 percent, and now we have practically hit the limit of what is allowed under the Budget System Law," he explained.

"Legally, this means we need to react very seriously and without delay, and I believe we as a country will have the strength to do this in time," added the governor.

He expressed expectation that if the budget balancing bill was passed soon and the International Monetary Fund (IMF) gave a positive review of Serbia's arrangement, and adding to this EU candidate status, Serbia's risk perception would start to shift in a positive direction and the situation would stabilize in the mid- and long-term.