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The Government of the Republic of Serbia

In the service of citizens

Budget position much better than in 2004

Belgrade, 8 June 2005

Serbian Minister of Finance Mladjan Dinkic said today that the three main goals of the Serbian government’s economic policy are increased exports, rising employment, and macroeconomic stability with an economic growth of between four and five percent in 2005.

Finance Minister Mladjan Dinkic at today's press conference

Dinkic told a press conference presenting the Ministry’s achievements in the first five months of 2005 that the volume of foreign direct investment in 2005 is expected to reach $2 billion.

He recalled that the Ministry of Finance, in cooperation with the ministries of economy and labour, has initiated micro loans for self-employment and he added that 7,212 people have applied so far, seeking a total of 7.35 billion dinars, or some €92 million, for projects that would create around 20,000 jobs.

This programme, as well as three other employment programmes in Kragujevac, Bor, and Vranje, should help create more jobs this year than in 2004, according to Dinkic.

A growth of between four and five percent this year, along with preserved economic stability, is one the key objectives of the government’s economic policy in 2005, said Dinkic.

Dinkic also noted that Serbia’s budget recorded a 650 million dinar surplus in the first five months of the year, the first budget surplus in the history of modern finance in Serbia, and he added that the budget surplus is expected to exceed three billion dinars by the end of the year.

Outlays in May fell by 1.5 billion dinars against April 2005, while budget revenues in the first five months of the year jumped 44 percent against a year ago thanks to the launch of value added tax (VAT), he explained.

According to Dinkic, VAT has also fuelled exports, which were increased by 51 percent in the first four months of 2005 against a year earlier.

Dinkic recalled that the budget deficit in the first five months of 2003 stood at 12.5 billion dinars and at 7.8 billion dinars in the same period of 2004. This year, the budget recorded a surplus of 650 million dinars in the January-May period, he said and added that the budget’s position is much better than in 2003 and 2004.

The better position will also bring down interest rates, Dinkic said and noted that the interest rates on T-bills fell from 21-22 percent six months ago to a record low of 17.9 percent today.

The better budget position has also opened the door to housing construction subsidies, said Dinkic and added that a budget revision in July and the launch of home loan subsidies will allow for more favourable terms for home loans.

Dinkic said that the largest outlay in the first five months of the year was for pensions, which amounted to a total of 31 billion dinars, and he explained that the government has decided to speed up reform of the pension system.

The second biggest consumer of budgetary funds was the Serbia-Montenegrin Army, which received some 18 billion dinars in the first five months of 2005, he said and recalled that the military budget for all of 2005 is around 43 billion dinars.

Dinkic said that Serbia’s exports in the first four months totalled some $1.37 billion, while imports amounted to $2.83 billion in the same period, which put the trade gap at some $1.46 billion, or down a third from a year earlier.

Dinkic also said that exports in the first four months jumped 51 percent year-on-year, while imports fell 6.4 percent, and he expressed the hope that the annual export growth target will be surpassed by 25 percent.