Minister: Goal is to reduce public debt and deficit

Minister: Goal is to reduce public debt and deficit

The arrangement is based on three pillars of the reforms, fiscal consolidation, financial sector consolidation and structural reforms, including the reforms involving government companies meant to make them more efficient, Vujovic told a news conference following the 100th meeting of the government, which was open to the public, and Monday's decision by the IMF to approve the arrangement with Serbia.

Serbia cannot deal with the economic crisis without reforms and has to solve structural issues, change laws and improve efficiency of government companies in order to achieve economic growth, he stated.

The reforms involve restructuring of government companies, solutions for large companies among them who record losses, further fiscal consolidation, a stable monetary policy and a reform of the public sector, Vujovic pointed out.

"The implementation of the program will be monitored by the government, National Bank of Serbia and IMF together," he said.

Commenting on the situation with the budget deficit, he stressed that Serbia was on a good way to achieve the goals set for the first quarter of 2015, adding that a budget deficit of RSD 55 billion was the goal for the first quarter.

"We expect it to be lower by at least RSD 20 billion, if not halved," Vujovic said, adding that the government's goal was to cut the budget deficit to 4.75 percent of GDP by 2017 and reduce the public debt-to-GDP ratio, which is currently at 72.3 percent.

Since July last year, when it was at 8.8 percent of GDP, the budget deficit has been cut by 2.2 percent and currently is at 6.6 percent, Vujovic said, adding that a further reduction to 3.6 percent was due as well, even though the target level is 4.75 percent.

The arrangement with the IMF is a positive signal to investors because it is an institutional affirmation that Serbia is on a good path, that it will control deficits and improve the business climate, Vujovic said.

Serbia is complying with the agreement with the EU and will subsidize state-owned enterprises only in case of market turmoils, he said.

"Bankruptcy is always Plan B. We have decided to stop giving budget funds - if a company fails to find a solution, bankruptcy is activated automatically, and the artificial maintaining of companies that are not economically sustainable will stop," the finance minister said, citing the example of the Smederevo steel mill, which used to be given EUR 4.5 million of budget funds per month, but generated losses of EUR 8 million.

The government has sufficient funds to provide assistance to workers who lose their jobs, but it will no longer subsidize public companies, Vujovic added.