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Serbs May Need Debt Reschedule, Write-Off, Stamenkovic Says

July 10, 2012

Serbia may need to ask the International Monetary Fund to allow the Balkan country to reschedule or write off debts, said Stojan Stamenkovic, the chief economist at the state Economics Institute.

“Based on global conditions and the ratio between debt levels and capital inflows, we could find ourselves in a situation to ask for debt rescheduling and a write-off, and it is very probable that it will be discussed with the IMF,” Stamenkovic said in Belgrade today. “Of course, no creditor would agree to debt rescheduling without an IMF agreement.”

Serbia’s 10-year Eurobond, maturing in 2021, fell to as low as $99.554 at 4:08 p.m. Belgrade time, or $3.74 lower than the previous day’s close.

Serbia has been struggling to stay out of a new recession and attract outside investment as political leaders squabble over power sharing following May 6 elections. The country’s debt-servicing ratio, the share of maturing principal and interest to export revenue, has exceeded 30 percent and over the next three years it will rise to 35 percent, the level where debt repayments become difficult, Stamenkovic told a news conference.

The external debt totaled 24.188 billion euros ($29.7 billion) at the end of May, or 63 million euros higher than December 2011. Exports stood at 9.5 billion euros for all of 2011.

Safe Finances

Branko Drcelic, the head of Serbia’s Debt Management Agency, sought to reassure investors after the comments, saying Serbia’s public finances are safe.

“Serbia’s external and internal debts are not threatened and we have repaid more than 60 percent of our debts this year so far to creditors,” Drcelic said in a phone interview today. “There is nothing that threatens Serbia’s public finances for now and the Republic of Serbia will regularly honor all its external and internal public debt liabilities.”

Drcelic said Serbia’s foreign exchange reserves, at 10.17 billion euros at the end of May “are sufficient for stable external liquidity.”

Still, Stamenkovic said Serbia faces a similar situation as it did in 1982, during the breakup of the former Yugoslavia.

Then, it “could no longer service its debts and it had to turn to the IMF for a program and eventually asked for debt rescheduling,” Stamenkovic said.

‘Complex’ Reforms

Asking for debts to be “rescheduled and partially forgiven” will give Serbia time to institute “complex” public sector reforms, Miladin Kovacevic, the deputy head of the Serbian Statistics Office, said at the same news conference.

The proposal should be part of a three-step plan, to be discussed with the IMF, which includes immediate measures to tackle debts and deficits, followed by “comprehensive public sector reforms,” he said.

Serbia will need to ask the IMF for a new loan to support the balance of payments and the dinar, instead of simply renegotiating a $1.3 billion precautionary program, which was suspended in February when the country began slipping on agreed fiscal targets, Kovacevic said.

To contact the reporter on this story: Gordana Filipovic in Belgrade at

To contact the editor responsible for this story: James M. Gomez at

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