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The Government of the Republic of Serbia

In the service of citizens

Serbia becoming a country with modern public finances

Belgrade, 22 December 2004

Serbian Minister of Finance Mladjan Dinkic presented results of the Ministry’s work over the last nine months and said that Serbia is becoming a country with modern public finances.

At a press conference closing 2004, Dinkic said that this year has been very successful for the Ministry as the parliament enacted 40 bills drafted by this Ministry. He also noted that GDP growth for 2004 amounted to 8 percent, exceeding a 4.3 percent projection, and that the budget deficit hit a record low. He explained that economic activity has revived in privatised companies as well as in those companies that have completed their restructuring process.

Summing up the work in 2004, the Minister said that positive results of the transition process, which began in 2000, were seen for the first time this year.

He said that the building of the business climate started by the previous government has continued during the current administration. The companies that have worked well so far are operating even better now, he noted, adding that those who are operating poorly will have little chance for survival and thus be forced into restructuring or bankruptcy.

Against expectations of numerous analysts and politicians, the Ministry managed to produce a record low budgetary deficit of around 26 billion dinars, an amount 20 billion dinars less than the planned sum and inclusive of a 7 billion dinar savings realised through October’s budget revision. The deficit is half that of the 2003 deficit and will range in the neighbourhood of 2 percent of GDP, he said.

Dinkic pointed out that the Ministry of Finance managed to strengthen arrangements with international financial institutions, recalling that the International Monetary Fund (IMF) gave support to 2004’s monetary policy as well as the 2005 economic policy plan.

In the last several months, as much as three arrangements with the World Bank have been realised, starting from July when reforms in Serbia were once again accelerated, Dinkic added. Stagnation of reforms occurred after the assassination of Prime Minister Zoran Djindjic and continued into the middle of 2004, picking up after the Serbian presidential elections.

Dinkic voiced satisfaction that in his role as a governor of the European Bank for Reconstruction and Development (EBRD), he will have an opportunity to host the most prominent figures from the world of finance at the bank's 2005 annual conference to be held in Belgrade in May of 2005.

He stressed that the Ministry of Finance has very good relations with the European Investment Bank and other international financial institutions. For that reason, a special department to deal with international financial relations has been set up within the Ministry. It will be led by Vladimir Vukojevic.

Dinkic mentioned another successful activity of the Ministry, namely the regular briefing of experts and journalists on budget expenditures through a newsletter on public finances

He further pointed out that a large number of factories will be opened in Serbia next year, motivated by lower production costs than in neighbouring countries. Also, Serbia can export a large number of products to Russia free of duty, Dinkic said, adding that Russia is a European market that is not fully supplied.

According to Dinkic, amendments to the Law on Excise Tax are also of great importance, because they have reduced taxation of farmers and construction firms, while the Law on Contributions has finally established a unique minimum basis for contributions.

The Law on Housing Loan Insurance Corporation has finally paved the way for long-term housing loans with a single digit inflation rate, Dinkic said.

The Law on Games of Chance, also adopted this year, will have its effects seen early next year when the Directorate for Control of Games of Chance will launch strict supervision of betting shops, casinos and slot bars.

The Minister of Finance said that the passing of the Law on Fiscal Cash Registers is important and the practical implementation is a very significant achievement. At the beginning of the year, there were few who believed that some 160,000 fiscal cash registers would be installed in Serbia by now, Dinkic said.

By passing the Law on Repaying Debt from the Economic Recovery Loan, in 2004 the state paid €3.2 million to citizens who had not received any money from the state in the past 15 years. Also, around $260 million was paid to holders of old foreign currency savings.

Dinkic said that the Ministry concluded agreements concerning wage policies in 2005 with representatives of almost all trade unions. The Ministry has also submitted proposals to the health and cultural workers’ unions, but agreements have yet to be signed.