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The Government of the Republic of Serbia

In the service of citizens

Enough money for all budget users next year

Belgrade, 31 December 2009

Serbian Prime Minister Mirko Cvetkovic said that Serbia managed to come out of a difficult struggle with the international financial crisis with as few scars as possible and moves towards the New Year thinking about development, not new difficulties.

Author: Fonet

In an interview for the New Year’s edition of the Novi Sad daily Dnevnik, Cvetkovic said that such a stance is rooted in the concept of state finances for 2010.

The government’s official web site gives excerpts of the interview.

Characteristics of the budget for 2010:

Only 7.5% is the capital part of the budget, therefore it is difficult to talk about development on that basis. However, we do not only observe the portion financed from the budget, but total public spending and projects to be partly realised from international loans. During the year we managed to secure considerable funds from international financial institutions and we will use them for infrastructure. Therefore, I can easily say that our overall economic policy in 2010 will be a policy of development.

Infrastructure plans for 2010:

Our plan is to complete the northern branch of the motorway in Vojvodina. We will also start constructing the southern and eastern sections on Corridor 10 and we intend to build another section towards the Adriatic. There are also several railway projects and other important infrastructure projects. The question of development is no longer closely linked with funds, but rather with the administrative capacity that has to make sure that all procedures are implemented without delay.

Most of the budget, i.e. 92.5%, will be used to cover current expenses. Does this guarantee certainty and agility in payouts to the most important budget beneficiaries:

It certainly does. You asked whether the budget is focused on development or not. I believe that the answer to that question means little to the people. What will mean much more to them is to see that they can count on their salaries, pensions and social welfare contributions. Apart from that, considerable funds will also be invested in infrastructure.

Have you made investment plans for Serbian industry in 2010, especially in terms of loans and stimulating interest rates:

Unlike some countries, we did not just inject money into our financial system. We increased the banking activity through incentives and thus fought the challenges. Now that we are gradually coming out of the crisis, in the sense that we will not have an additional drop in GDP but a mild rise, a question that we must ask is whether such policy should be continued. After talks with businessmen and bankers we concluded that we should withdraw from that domain, but gradually. We will keep on with these incentives in 2010, but to a lesser degree, and in 2011, depending on the state of affairs, we will abolish them completely.

Budgetary deficit in 2010 will exceed RSD 100 billion and it has already been announced that it will be covered by more loans. The funds for capital investments are also provided from loans, and all of it is booked as public debt. Is there a danger of the public debt exceeding the critical line and turning into an even more serious problem:

The amount of the debt is important, but what matters even more is what we do with the funds and what we leave to future generations. If all we leave them is debt, than it is not good. But if we leave them debt and actual values that came out of the debt, than we are talking about a completely different matter. All debts resulting from projected loans are justified, even if their largest portion is paid back by future generations. I have to add that a large portion of the foreign debt is in fact loans from 20 or 30 years ago which we refinanced with creditors from the London and Paris Clubs and the World Bank. We are now trying to take loans for projects with very specific and tangible effects and our goal is not to strain our public finances.

Still, public debt increase is evident:

I would say that our debts did not increase a lot compared to what we had gone through. We had revenues from privatisation exceeding €600 million and our total deficit in 2009 amounts to around €1.1 billion. We used this money to finance the deficit, which means that our net debt is only around half a billion Euros. Our debt did increase to 32% of GDP, but we should also bear in mind that this came about because we borrowed more funds than we actually needed. This money has not been spent and is now a part of our foreign currency budget reserve. We have around €400 million at our disposal. We will make sure we have enough funds in case of any serious disturbances.

How far in the making has the bill on public property gone:

The bill is being drafted at the Ministry of Finance and its basic frame has been completed. Along with the bills on property relations and restitution, this bill is part of the property reform. There is great political will to adopt it. The current law is causing us a lot of trouble because we cannot privatise any public company, as the assets are state property, and the companies are simply using them. This is an issue we must solve.

The deal with Fiat was breaking news in 2008 and now its realisation is one of the key events in 2009. How important is this deal and does it really signify the end of the recession for Serbia:

I am very glad that I have lived to see Serbia make crucial and historic steps towards EU accession. It is clear that this is the road we should take. I would also like to participate in the historic moment when the Serbian economy moves forward. Of course, we will have to wait for a year or two to see the true results. Every country with a relatively small market has to be export-oriented. When Fiat said they will invest in a company that will produce 200,000 vehicles, we knew that the company will be focused on export. We were assured that 80% of the production will take place in Serbia. Therefore I am free to say that two or three more projects such as this one with Fiat and we are out of the transition period.

Can we expect extraordinary elections in 2010:

There are no reasons to call for extraordinary elections. That would only halt the reforms and slow down Serbia’s pace towards the EU. Ever since this government was formed, we have been accused of many weaknesses. Some predicted we would not last long, others that the coalition itself is unnatural. I say that they should judge the government on the basis of its achievements. Have a look at the platform on which the government was formed and see how many goals we have achieved. Let me just mention four remits: EU integration, Kosovo-Metohija, the economy and the fight against corruption and crime. It is beyond any doubt that we have achieved successes there.

New Year’s message to Serbian citizens:

People should be optimistic and look for the silver lining even in the hardest times. I cannot say that life in 2010 will be much better. It will be better to a certain degree. This does not mean that we have left the crisis behind us. There is much work to be done, many concessions to be made, but we must draw our optimism from the fact that we have finally started moving in the right direction. And every day we will be a little better that before.