"Deficit to be financed with loans, bilateral arrangements"

BELGRADE A Ministry of Finance official says Serbia will next year "cover its budget deficit by taking out loans in the domestic security market." The country will also finance the deficit by "making bilateral arrangements," Nikola Corsovic, a state secretary with the ministry, said in a statement for Tanjug. "Deficit to be financed with loans, bilateral arrangements" He added that the issuance of Eurobonds on the international market remains the possible third source of financing, but the government will resort to that only if other sources prove insufficient for covering the deficit. "For Serbia, the most favorable source of financing would be a USD 3 billion loan from the United Arab Emirates, whose greater part would be used as assistance to the budget for an early payment of high-interest loans," he noted. Serbia also counts on a USD 200 million loan from the Russian Federation, and the country agreed an arrangement with the World Bank amounting to USD 250 million as assistance to the budget, which is conditional upon the success of the Serbian government in completing the restructuring of enterprises, Corsovic said. Taking into account new loans for financing the high budget deficit, it is expected that Serbia's public debt will reach 67 percent of the gross domestic product (GDP) at the end of 2014, and then it is expected to stabilize in 2016, the state secretary said. In line with the Ministry of Economy's new policy, the biggest savings in the 2014 budget have been made by reducing subsidies to public enterprises, he said. "Another group of spending cuts will be implemented by lowering the public sector operating costs even further," he said. Serbia will also reduce expenditures on servicing interest rates, although they will rise in absolute terms, it is expected that interest rates will be reduced thanks to bilateral loan agreements, Corsovic specified. As regards an increase in revenues, the ministry primarily counts on a rise in the lower VAT rate and a curb on the grey economy, which implies the more efficient tax collection, the VAT in particular, and the more efficient collection of excise duties, including the efforts put in countering tobacco smuggling, he said. The other major contribution to an increase in revenues will come from the solidarity tax, Corsovic said. Tanjug

"Deficit to be financed with loans, bilateral arrangements"

He added that the issuance of Eurobonds on the international market remains the possible third source of financing, but the government will resort to that only if other sources prove insufficient for covering the deficit.

"For Serbia, the most favorable source of financing would be a USD 3 billion loan from the United Arab Emirates, whose greater part would be used as assistance to the budget for an early payment of high-interest loans," he noted.

Serbia also counts on a USD 200 million loan from the Russian Federation, and the country agreed an arrangement with the World Bank amounting to USD 250 million as assistance to the budget, which is conditional upon the success of the Serbian government in completing the restructuring of enterprises, Ćorsović said.

Taking into account new loans for financing the high budget deficit, it is expected that Serbia's public debt will reach 67 percent of the gross domestic product (GDP) at the end of 2014, and then it is expected to stabilize in 2016, the state secretary said.

In line with the Ministry of Economy's new policy, the biggest savings in the 2014 budget have been made by reducing subsidies to public enterprises, he said.

"Another group of spending cuts will be implemented by lowering the public sector operating costs even further," he said.

Serbia will also reduce expenditures on servicing interest rates, although they will rise in absolute terms, it is expected that interest rates will be reduced thanks to bilateral loan agreements, Ćorsović specified.

As regards an increase in revenues, the ministry primarily counts on a rise in the lower VAT rate and a curb on the grey economy, which implies the more efficient tax collection, the VAT in particular, and the more efficient collection of excise duties, including the efforts put in countering tobacco smuggling, he said.

The other major contribution to an increase in revenues will come from the solidarity tax, Ćorsović said.