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The Government of the Republic of Serbia

In the service of citizens

Growth in exports, employment, reduction in deficit priorities in 2006

Belgrade, 2 June 2005

Serbian Minister of Finance Mladjan Dinkic said after today’s session of the Serbian government that the government adopted a Proposal of the memorandum on the budget and the economic and fiscal policy for 2006, with projections for 2007 and 2008, which envisages a growth in exports and employment, reduction in the foreign trade deficit and preservation of macroeconomic stability.

Mladjan Dinkic, left, and Predrag Bubalo

Dinkic told a press conference that the government assessed that an urgent reform of the pension system is necessary. For that reason, the Serbian Ministry of Labour, Employment and Social Policy will prepare amendments to the Law on pension and disability insurance by the end of June, which will provide legal grounds for the reform of the pension system to be completed by 2009.

The Finance Minister said that the government today adopted changes to the Law on the value added tax (VAT), reducing the tax rate for a large number of products from 18 to 8 percent, while humanitarian aid and donations coming from abroad will be exempted from VAT. Furthermore, all health centres, churches and religious organisations that have been paying VAT since January 1 will receive refunds.

Dinkic explained that the reduction of the VAT rate from 18 to 8 percent covers newly-built apartments, frozen fruits and vegetables, meat, fish, medicines, cattle feed, live stock and tickets for cinemas, concerts and sporting events.

The amendments to the Law on tax procedure and tax administration will additionally tighten fiscal discipline and enable the increase in the collection of revenues, Dinkic explained. Also two laws were adopted providing counter guarantees of the Republic of Serbia to the state union of Serbia-Montenegro for loans from the European Bank for Reconstruction and Development (EBRD), which will be used for modernisation of the air traffic control system at the Belgrade airport, reconstruction of the municipal infrastructure in Subotica and purification of waste waters in Palic lake.

Dinkic also announced that a draft decision on the reduction of excise tax for oil derivatives was adopted and that a proposal was made to reduce excise taxes on all oil derivatives by 3 dinars.

Dinkic said that Serbian Prime Minister Vojislav Kostunica informed government members at the beginning of the session that eight persons suspected of taking part in the crime against civilians in Srebrenica have been arrested, and stressed that all those who took part in that heinous crime will be brought to justice.

Commenting on the adoption of a programme of employment in the municipalities of Kragujevac, Bor and Vranje, Serbian Minister of Economy Predrag Bubalo said that the Serbian government will not finance local agriculture, infrastructure and trade in these cities.

He explained that the government's aim is to finance small and medium-sized enterprises that will create more jobs, adding that loans for the SMEs sector will be highly favourable.

Bubalo said that owing to the government's programme, production in the Dragan Markovic agricultural complex from Obrenovac has revived. He added that due to perceived irregularities in the privatisation of a part of the Novosti company, the state capital in that company will be protected.