Serbia needs to cut spending by about $1.3 billion and bring this year’s budget deficit to 4.6 percent of economic output as it seeks to regain investor confidence and stabilize the dinar.
The Finance Ministry submitted to the ruling coalition a list of cost-cutting measures and incentives for investors for a quick approval and checks by the fiscal regulator, the International Monetary Fund and trade unions, before making them public next week, Finance Minister Mladjan Dinkic said in the capital Belgrade today.
“We are fully aware that we must cut the deficit by three percentage points and the goal I’ve set is that the deficit must not exceed 4.6 percent of gross domestic product,” Dinkic told reporters.“The economic situation can only be improved if development measures are implemented simultaneously with strict savings.”
Dinkic, whose party of technocrats is a junior coalition partner to the dominant Serbian Progressive Party of former nationalists and Socialists of late Serbian strongman Slobodan Milosevic, said “investors expect to see those measures” and a revised budget will follow by the end of June.
The government should strip unprofitable public companies of state financing and all parties “needs to agree to give up on non-productive spending,” said Dinkic, hours before meeting Premier Ivica Dacic and Deputy Prime Minister Aleksandar Vucic.
Failure to streamline spending by at least two percent of GDP, or 600 million euros ($793 million), will widen the budget gap to 8 percent of GDP, or more than double an initial 3.6 percent target, the IMF said on May 22.
Serbia’s 2012 GDP was 29.9 billion euros, according to Finance Ministry data.
The dinar fell three percent against the euro since May 22 and traded at 114.4485 at 2:07 p.m. in Belgrade, its lowest level since Dec. 7, according to data compiled by Bloomberg. The yield on Serbia’s dollar bond maturing in 2021 rose to 6.1 percent from 5.8 percent yesterday.
Dacic’s Socialists and their coalition partners of the Pensioners Party don’t want to back any cuts or freezes in public wages and pensions, while Vucic’s Progressives say they support tough measures without specifying them.
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