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The Government of the Republic of Serbia

In the service of citizens

Budget revision reasonable solution

Belgrade, 24 October 2008

Serbian Minister of Finance Diana Dragutinovic said today that a budget revision for 2009 is a reasonable solution in the current political circumstances, revenues and expenditures are synchronised with the government’s developmental and social priorities.

Diana Dragutinovic

At the press conference regarding the first 100 days of the government’s work, the Minister said that budget revenues were increased due to the increase in revenue from income tax, profit tax and customs. As for expenditures, they increased due to raised subsidies, pensions, unemployment allowances, whose payment was speeded up, while the overall budget deficit increased by 0,2% of GDP.

The Minister stressed that fiscal policy is not optimal, but it is sustainable, the main rules had been respected, such as keeping budget deficit no higher than 3% of GDP, the state asking for loans only for investment purposes as well as public debt being at a stable level.

She pointed out that any budget for 2009 has to be more restrictive than the previous one. As for the Ministry’s work, she said that it can always be improved.

According to her, the International Monetary Fund (IMF) experts, who will arrive in Belgrade on October 28, will participate in the final budget drafting. They will also continue negotiations on new arrangements with Serbia.

Serbia will have minimum costs as well as considerable benefits according to the new IMF programme, explained the Minister.

She added that the programme will raise Serbia’s credibility and enable more favourable loans from international financial organisations and private investors, make fiscal policy sustainable and regulate spending, income and productivity.

Serbia will also speed up the EU integration process, stressed Dragutinovic, adding that the programme, together with other means, will contribute to market stabilisation.

The Minister said that the Finance Ministry coordinated fiscal and monetary policies during its first 100 days of work, and the Ministry and the National Bank of Serbia are closely following the global financial crisis and its possible effects on Serbia.

The government also passed laws on public procurement and the securities market, also several agreements with international financial organisations concerning loans, guarantees and donations worth some €500 million were ratified, said Dragutinovic.

She said that that the implementation of the transitional trade agreement with the EU will lower the price of goods.

According to Dragutinovic, the Finance Ministry will issue treasury bonds to encourage the domestic financial market, to reduce debt to the international market and increase the effectiveness of monetary policy.

Dragutinovic said that the bill on amendments to the law on deposit insurance, according to which the deposit insurance limit for private persons, entrepreneurs and small and medium-sized enterprises will be raised from €3,000 to €50,000, has been forwarded to parliament as urgent procedure and should be adopted directly after the budget revisal.

The law is expected to come into force immediately after being passed, said the Minister, stressing that according to this law deposits both in the Serbian dinar and foreign currencies will be insured.

Dragutinovic said that the recommendation to increase the excise duty on fuel was made in order to keep fuel prices stable, regardless of the fluctuation in price globally.

According to Dragutinovic, raising excise duty on fuel at a time when fuel prices are falling would make it possible to reduce the price during periods when the price is high.