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The Government of the Republic of Serbia

In the service of citizens

Serbia to enter second phase of transition in late January 2006

Belgrade, 21 December 2005

Serbian Minister of Finance Mladjan Dinkic said today that Serbia will enter the second phase of transition in late January 2006, when the conclusion of the financial arrangement with the International Monetary Fund (IMF) is expected.

Author: Fonet

At a business lunch organised by the US Chamber of Commerce, Dinkic said that the most painful reforms are behind us and voiced satisfaction with the fact that 90 percent of economic goals have been achieved, except for maintaining the inflation rate within projected limits.

He said that inflation is a challenge that should be solved in 2006, even at the cost of somewhat lower economic growth, which will be six percent of GDP in 2005.

The Minister of Finance said that the next meeting with IMF representatives will be held in January or February next year, when future cooperation with this international financial institution will be defined in more detail.

Dinkic said that it is in Serbia's interest to conclude one more arrangement with the IMF, which will not necessarily entail new lending, because the current foreign currency reserves, which stand at $5.7 billion, are sufficient enough not to ask for new loans. He said that in next few years Serbia will repay all loans to the IMF.

Dinkic said that the best economic result achieved be the Serbian economy this year is a marked export growth of 35 percent, to which multinational companies present in Serbia largely contributed, first and foremost US Steel.

According to Dinkic, foreign direct investments, which are above the sum of $ 1.5 billion, will be enough in the upcoming year to continue the trend of accelerated growth of exports.

He explained that inflation this year was secondary in importance, since the major goal was to increase exports and reduce the deficit in the balance of payments.

Speaking on the basic goals of the Ministry of Finance for 2006, Dinkic gave the example of the adoption of the new law on financing local communities, which is expected to take place in the middle of the upcoming year. He explained that the law will improve the financial position of local self-governments, also making them more responsible.

He said that realisation of the budgetary surplus at the very beginning of 2006 will open up the possibility for reducing income tax, which will lessen labour costs and make Serbian economy and exports more competitive.

He said that it is expected that tax demands be reduced in the health systems, which will in the upcoming year totally change the method of financing.

Dinkic said that also in the upcoming year “something completely new” will happen in Serbia, and that is that Serbian companies such as “Dunav Osiguranje”, “Telekom Srbija”, “Komercijalna Banka” and some other private firms will begin to invest in neighbouring countries.