"General government debt 72.2 pct of GDP"

"General government debt 72.2 pct of GDP"

The increase in public debt to GDP was record high (11.1 percentage points), mostly owing to a strong growth of the U.S. dollar against the euro and the Serbian dinar.

According to the Fiscal Council, the changes in the exchange rates alone accounted for an increase in the public debt by almost five percentage points of GDP.

Since mid-2014, when the U.S. dollar started to grow, relevant government’s liabilities increased by about EUR 1 billion, the Fiscal Council said.

The euro’s drastic decline against the dollar continued in January 2015, by seven percent, which increased the public debt by EUR 1.5 billion to put it to EUR 23.7 billion, or more than 74 percent of GDP, and at the end of the month.

Dollar’s growth made all loans denominated in that currency more expensive, said the Fiscal Council.

The budget expenditures to pay interest could, if the U.S. dollar remains at the level it was at the end of January, go up 10 percent against 2014, which would correspond to a pre-agreed interest rates’ growth by one-fourth.

Last year, the general government debt increased by 2.5 billion, primarily due to a higher fiscal deficit, estimated at around EUR 2 billion, or 6.6 percent of GDP, the report said.

The Council stated that December’s fiscal deficit was extremely high, RSD 44 billion, despite a seasonal increase in public revenues, due to record high public expenditures, the Fiscal Council said.

Finance Minister Dusan Vujovic said on Friday that "nothing was really posing a threat to public debt repayment," Tanjug said in its report.

Vujovic said that major changes in exchange rates in the global financial market, especially the growth of the dollar against the euro, had resulted in an increase in Serbia's public debt, although over the previous four months, the dollar portion of the debt had only increased by approximately USD 100 million and now amounted to about USD 8.7 billion.

In the future, the government will be borrowing more in dinars, so that the share of the dinar portion in public debt could grow from the present 22 percent to 40 percent of the public debt, Vujovic said.

The trend of cutting interest rates on government securities, which the government uses for borrowing in the domestic financial market, and the trend of extending the maturity of debt, has continued, Vujovic said.

Borrowing from long-term sources of finance is on the increase as well, said Vujovic, adding that government bonds were typically issued in maturities of two, three, five, seven and 10 years, and interest was three to five percentage points lower than three years before.

Serbia is moving from short-term to long-term securities with lower interest and it will use favorable interest rates to borrow in euros, Vujovic said.