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The Government of the Republic of Serbia

In the service of citizens

Keeping macroeconomic stability necessary

Belgrade, 14 November 2007

Serbian Minister of Finance Mirko Cvetkovic said today that it is necessary to keep macroeconomic stability in the country and warned that any disturbances would lead to inflation and destabilisation of the economic system.

In an interview to Tanjug news agency occasioned by the adoption of the 2008 budget bill, Cvetkovic said that the Ministry of Finance and the Serbian government do not create funds, nor do they decide at will to whom to give them and to whom not, but they distribute joint funds of all citizens of Serbia.

He said that around RSD 46.6 billion has been earmarked for the National Investment Plan for 2008, for which RSD 34.6 billion will be set aside from the budget and RSD 12 billion will be provided through loans.

The budget deficit planned for 2008 is RSD 1 billion more than this year's since the entire budget is overloaded due to transfers to local self-governments, said Cvetkovic. He added that the planned deficit is relatively small for a budget worth RSD 639.6 billion.

He said that the National Bank of Serbia (NBS) plans that base inflation should be in the range of 3% to 6%. He added that if the NBS succeeds in keeping the base inflation rate at this level it will give the Finance Ministry scope to resist pressure to raise prices, so that total inflation at the end of 2008 should stand at nearly 6%.

Speaking about funds for local self-government Cvetkovic said that these funds will be paid automatically through informatic software which distributes funds on the basis of given criteria. He stressed that the budget inspection will control expenditure from state funds.

Cvetkovic said that disparity in electricity prices was removed during the previous few years, so that now any increase will be minimal, following which there will be no further increase.

He stressed that after getting a write-off for parts of the debt towards the Paris and London clubs of creditors and payments of debt to the IMF and the World Bank, Serbia is not a country deeply in debt since public debt is 29.6% of the GDP.