Bloomberg News

Serbian Borrowing Costs to Fall Below 5% in 2013, Dinkic Says

November 26, 2012

Serbia’s government hopes its fiscal measures will boost investor sentiment and push borrowing costs below 5 percent in 2013, Finance Minister Mladjan Dinkic said.

The western Balkan nation, rated BB- at Standard & Poor’s, three levels below investment grade, plans to sell $2 billion of debt in 2013 to part-finance its budget deficit next year.

“We will go below 5 percent with borrowing costs next year,” Dinkic told lawmakers during a debate on the 2013 budget. Prime Minister Ivica Dacic’s Cabinet, in office since July 27, wants to bring the cost of its borrowing abroad to “around 3.5 percent” during its term, Dinkic added.

The government seeks to narrow the 2013 fiscal gap to 3.6 percent of economic output from 6.7 percent this year and ultimately balance the state’s finances by 2016, according to the next year’s budget proposal.

Serbia sold a benchmark, five-year Eurobond worth $750 million on Nov. 14, with a 5.45 percent yield and a 5.25 percent coupon. In September, yields on a reopened 2021 bond issue stood at 6.625 percent.

The International Monetary Fund said Nov. 20 that its sees the plan as “overly ambitious” and will wait until the spring before resuming talks with Serbia on a new loan program.

Fiscal consolidation is “an urgent priority” as Serbia faces “numerous challenges” and “addressing the economic challenges requires appropriately balancing fiscal consolidation and growth objectives,” the Washington-based lender said.

To contact the reporters on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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