Serbia to Cut Subsidies by 20% in 2013 Budget, Minister Says

Serbia plans to reduce government subsidies by almost 20 percent in 2013 as it seeks to halve its fiscal deficit.

The government will cut subsidies to 26 billion dinars ($290.9 million) from 32 billion dinars this year, Finance Minister Mladjan Dinkic told reporters in Belgrade today.

The government will continue to subsidize “bank lending at least through the first half of 2013 to ensure liquidity,” Dinkic said. Subsidies to unprofitable companies will be reduced to “encourage them to find a partner,” Dinkic said.

The economy will probably grow 2 percent next year, after contracting by almost a full percentage point in 2012, he said.

Prime Minister Ivica Dacic’s Cabinet, sworn in on July 27, is trying to stave off bankruptcy, ensure enough funds to finance the budget gap, pay pensions and public wages and keep on servicing foreign creditors.

The government has yet to secured the support of the International Monetary Fund, which wants to see how Serbia handles its deficit and central bank autonomy before committing to a new loan program. The IMF suspended a $1.3 billion deal in January on evidence the previous government was slipping on agreed fiscal targets.

All government departments must submit their draft 2013 financing plans by Oct. 1 with clearly defined spending caps and subsidy limits, Dinkic said.

The government will replace tax office managers by the end of 2012 and step up controls of income and property of all bankruptcy trustees who have been “slow and inefficient” in completing bankruptcy procedures while receiving “high fees,” he said.