Q:
A:
Government to contemplate further cuts in public spending
Belgrade,
18 June 2009
Minister of Finance Diana Dragutinovic stated that since revenues are lower that projected budget expenses, Serbia will have to contemplate further cuts in public spending.
Author:
www.rts.rs
In a statement to Radio Television Serbia last night Dragutinovic said that due to the recession Serbia’s GDP has marked a negative growth of 5%, while the budget deficit reached 4.5% of GDP, therefore a new budget revision may still be an option.
She explained that there are two solutions, namely to decrease the number of employees in public administration, with appropriate social programmes, or to conduct a thorough reform of the pension and social care system.
The Minister said that the reduction of expenses through lay-offs will be the ultimate resort.
Further reduction in public spending is not the right cure for recession, because so far there has been no significant fall in VAT revenues, Dragutinovic stressed, adding that it is certain that state revenues by the end of the year will be lower than projected. According to the Minister, countries usually cover their budget deficit by taking foreign loans, so Serbia should do the same.
Asked whether the IMF will accept a further increase in GDP, she voiced her belief that the IMF will approve an increase up to 4.5% because Serbia’s demands are well grounded.
Dragutinovic noted that the government must implement essential reforms when it comes to reductions in public spending. The Minister pointed out that although inflation has reached 7.2% it will decrease by the end of the year, recalling that the government’s plan is to secure inflation of 8% in 2009.
The excise duty on oil derivatives will not be reduced if public spending does not decrease, said Dragutinovic, noting that compared to other countries in the region it is not too high.
The Minister said that the reduction of expenses through lay-offs will be the ultimate resort.
Further reduction in public spending is not the right cure for recession, because so far there has been no significant fall in VAT revenues, Dragutinovic stressed, adding that it is certain that state revenues by the end of the year will be lower than projected. According to the Minister, countries usually cover their budget deficit by taking foreign loans, so Serbia should do the same.
Asked whether the IMF will accept a further increase in GDP, she voiced her belief that the IMF will approve an increase up to 4.5% because Serbia’s demands are well grounded.
Dragutinovic noted that the government must implement essential reforms when it comes to reductions in public spending. The Minister pointed out that although inflation has reached 7.2% it will decrease by the end of the year, recalling that the government’s plan is to secure inflation of 8% in 2009.
The excise duty on oil derivatives will not be reduced if public spending does not decrease, said Dragutinovic, noting that compared to other countries in the region it is not too high.
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