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The Government of the Republic of Serbia

In the service of citizens

Budget execution report for first five months presented

Belgrade, 12 June 2008

Serbian Minister of Finance Mirko Cvetkovic presented today at the government’s session the Finance Ministry’s budget execution report for the first five months of this year and projections for state coffers until the end of the year.

Mirko Cvetkovic and Zoran Loncar

Speaking at a press conference, Cvetkovic said that the analysis of budget expenditure during the first five months of this year shows that the budget is very balanced, but there will be a budget deficit regarding the part of the budget for irregular payments which will stand at nearly RSD 35 billion.

He said that due to this the Ministry has proposed a way to acquire additional funds to cover the budget deficit, and is preparing to release securities on the domestic market.

The state’s debt on that basis will not affect the public debt, explained Cvetkovic and added that the deficit will occur due to a decrease in privatisation revenue this year.

Cvetkovic said that the fact that during the first five months of this year, revenues worth RSD 253 billion were realised in the current services budget, while expenditure stood at RSD 254 billion, and the deficit at RSD 1 billion, shows that the budget is balanced.

This shows, he stressed, that the budget was well planned and there should be no problems until the end of the year. Privatisation revenues worth RSD 12.7 billion are expected by the end of the year, as well as RSD 40.2 billion from budget deposits, but a further RSD 35 billion will be required.

The Finance Ministry report states that a sum of RSD 35 billion should either be secured through new privatisation processes or by loans from domestic or foreign banks, and the ministry recommends that while making a decision it is necessary that the Serbian government takes a stand on the matter, considering the fact that it is possible to reduce expenses in order to decrease the amount needed.

A new debt analysis is necessary to determine questions such as deadlines, debt expenses, as well as the market which the state will be in debt to.

According to those projections, nearly RSD 14.8 billion will be required in order to cover the planned budget deficit, and some RSD 87.9 billion to finance the part of the budget which deals with irregular payments.

During the first five months, public debt payments were made, recapitalisation processes were carried out, loans were given out and additional privatisation expenses worth RSD 37.6 billion from the previous years were financed by privatisation revenues from 2008 and by reducing state deposits by nearly RSD 38.9 billion.

During the first five months of this year, budget revenues from privatisation stood at RSD 5.7 billion, and net state deposits were reduced by RSD 33.2 billion, so that budget proceeds in the period from January to May stood at RSD 38.9 billion, and this sum was used to pay the public debt and to procure financial assets, including recapitalisation.

The report also states that while making a comparative analysis it should be kept in mind that during the first six months of 2007 interim financing was in effect, which practically kept expenses at the same level as in 2006, and accounts for a high growth rate in 2008 compared to corresponding periods during the previous year.

There were capital expenses worth RSD 4.2 billion during the first five months of this year, which is only 13.5% of the annual plan and 37% of the planned expenses for realisation of the National Investment Plan (NIP) projects.

Serbian Minister of Education Zoran Loncar said that government members received the report on budget expenditure during the first five months of this year while the session was in progress, and were therefore unable to make a detailed analysis.

Loncar said that Minister of Trade and Services Predrag Bubalo and Minister of Infrastructure Velimir Ilic, who had earlier raised the question of budget expenditure in public, will keep the public informed about their findings based on the report.

Speaking about decisions made at the session today regarding government staff, Loncar said that ministers from the Democratic Party and New Serbia did not vote in favour of them.

The Minister added that members of the managing board of Politika were appointed at the session, and these are director Goran Markovic, professors at the Faculty of Political Science Slobodan Markovic and Zoran Stojiljkovic, president of the Belgrade Fund for Political Excellence Sonja Liht, screenwriters Branimir Dimitrijevic and Slobodan Bogunovic.