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The Government of the Republic of Serbia

In the service of citizens

State to continue meeting its financial obligations

Belgrade, 10 May 2007

Serbian Minister of International Economic Relations and coordinator of the Serbian Ministry of Finance Milan Parivodic said today that the state's finances are stable and that it will continue to meet its financial obligations.

Milan Parivodic

Parivodic said at a press conference held after the government session that monetary policy will be serious, responsible and restrictive so that macro economic stability should not be harmed.

He voiced hope that a new democratic government will be formed before the deadline and that if that does not happen, there are two possibilities when it comes to financing and that is to change the Law on budgetary system or to adopt a budget law.

Parivodic said that the second option is more probable - that the existing bill on budget be modified by certain amendments.

The Minister said that these amendments are currently being prepared and that they envisage a more restrictive financing than the one envisaged by the bill on budget for 2007.

He said that at today's session, the government supported by the Draft law on denationalisation and building land that envisages restitution of fixed assets and a restricted amount of non-fixed assets on the condition that ownership rights were not acquired over them in the meantime.

As for fixed assets, this document envisages denationalisation of city building land which is today under the state monopoly, Parivodic said and added that that is the largest obstacle to investments in Serbia.

The object of restitution under this law are other real estate as well such as business space, apartments, garages, all separate parts of facilities, industrial facilities, commercial facilities, the Minister specified and added that objects of extreme cultural importance are the first included as non-fixed assets.

He said that the rights of former owners to denationalisation will be realised through natural restitution and where that is not possible, through indemnification.

He said that this document envisages the absolute maximum for indemnification which is €4 billion and added that the draft of this law will ensure that the transfer of ownership be efficient and that administrative procedures be short.

The advantages of passing this law are numerous, the Minister said and noted that Edward McMillan-Scott, Vice-President of the European Parliament, sent a letter to Serbian Prime Minister Vojislav Kostunica in which he supported this law.

According to him, McMillan-Scott stressed that this issue is most urgent for Serbia’s EU integration and added that this law is the only way to attract strategic investors and provide the necessary amount of greenfield investment.

Radomir Naumov

Minister of Energy and Mining Radomir Naumov said that the government today approved the decision of the managing board of the public company EPS on the increase of electricity prices by 15%, which will influence annual inflation by nearly 1%.

He recalled that the last price increase of electricity was in April 2006 and explained that this is necessary in order to provide regular and safe power supply.

The Minister also said that the power price increase does not endanger macroeconomic expectations for the state and the economy, noting that the current inflation rate is very good as it stands at nearly 4.5% from April last year until April this year, whereas it was around 2% in the January-April 2007 period.