Serb Parliament Approves $1.8 Billion in New Borrowing for 2012

The Serbian Parliament backed sovereign guarantees of as much as $1.8 billion in 2012, boosting public-debt levels further beyond limits before general elections in May.

The loans for new energy and road infrastructure, a state- sponsored residential project, repayment of some old debts and fresh liquidity for debt-laden, state-owned flag carrier JAT Airways and drugmaker Galenika AD are equivalent to almost 10 percent of the country’s existing public debt.

The government will be issuing guarantees to Serbian units of Italy’s UniCredit SpA (UCG), France’s Societe Generale SA (GLE), Austria’s Hypo Alpe-Adria-Bank AD (0005637D) and the Dutch unit of Erste Group Bank AG (EBS), Serbia’s Komercijalna Banka AD (KMBN) and AIK Banka AD (AIKB), the Export-Import Bank of China, Japan’s International Cooperation Agency, the European Bank for Reconstruction and Development, the European Investment Bank, the Council of Europe’s Development Bank and the government of Azerbaijan, for 13 different loans.

The approved guarantees exclude the Srbijagas gas monopoly and state railways operator Zeleznice Srbije, whose planned borrowing would have doubled the total.

Sovereign guarantees worth 2.7 billion euros ($3.5 billion) under the 2012 budget, along with 4.4 billion euros worth of government’s own borrowing, led to a freeze of Serbia’s $1.3 billion precautionary loan deal with the International Monetary Fund.

The IMF includes sovereign guarantees in public debt calculations and Serbia doesn’t. Late last year, the state took over 700 million euros in sovereign-backed debt from Zeleznice Srbije, road operator Putevi Srbije and several non-profit public institutions.

Public debt stood at 14.47 billion euros ($19.47 billion) at the end of last year, or 45.1 percent of GDP, according to the Finance Ministry. The central bank says the nominal debt figure is equal to 47 percent of GDP and above the 45 percent legal cap.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: Alan Crosby at acrosby1@bloomberg.net

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