Bloomberg News

Serbia Near Bankruptcy, Awaits $1 Billion UAE Loan, Vucic Says

October 07, 2013

Serbia is close to insolvency and must cut public wages and subsidies to state companies to avert it, Deputy Prime Minister Aleksandar Vucic said.

The government is slated to introduce steps today designed to squeeze the deficit and shrink public debt without affecting pensions, a crucial demand of the junior ruling Pensions Party, Vucic told Prva TV broadcaster in an interview yesterday.

“We are virtually on the verge of bankruptcy,” he said, according to the interview. “Measures for economic recovery will be tough and not populist and will affect between 300,000 and 500,000 public-sector workers,” he said, adding that the savings will amount to “between 200 million euros and 230 million euros.”

Serbia’s fiscal deficit is expected to reach 8.3 percent of gross domestic product this year, according to the International Monetary Fund. The government wants to cut the deficit by as much as 1.6 billion euros ($2.2 billion) by 2016 to assuage investors, Finance Minister Lazar Krstic said in Oct. 2 interview.

Belgrade plans to reach a financing deal with the IMF, Vucic said. The Washington-based lender refused to begin talks in May because it deemed the government had failed to meet budgetary commitments.

UAE Loan

Vucic, the leader of the opinion-poll-leading Serbian Progressives, the biggest party in Prime Minister Ivica Dacic’s coalition government, said the cabinet will accept some and reject other measures proposed by the IMF. He also said Serbia’s credit rating could be downgraded in the near term.

The government expects to borrow $1 billion from the United Arab Emirates by the end of this year and the amount will potentially reach between $2 billion and $3 billion by the end of 2014, Vucic said.

Half of this year’s UAE loan will be used to retire some of the “most difficult debts” and the other half will be “injected into the economy,” he said, without elaborating.

Serbia will also offer its dominant state-owned land line provider Telekom Srbija AD for sale at a price of between 1.5 billion euros and 2 billion euros, “when we know exactly how to spend those receipts,” Vucic said.

To contact the reporter 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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