Nov. 29 (Bloomberg) -- Serbia will ask the European Investment Bank for 500 million euros ($649.5 million) worth of loans to support small-and medium companies next year, when financing needs are expected to grow as the economy recovers.
The loan from the European Union’s lending arm will offer Serbian private companies access to cheaper long-term funding, Finance Minister Mladjan Dinkic told lawmakers today, asking them to approve guarantees for additional sovereign-backed borrowing.
“We have decided to ask the EIB to double the amount of those loans, which come with a 12-year maturity, five-year grace period” because the need for private-sector borrowing will “expand next year due to strengthened economic activity,” Dinkic told Parliament’s Finance Committee.
The Luxembourg-based EIB and the World Bank agreed on Nov. 8 to a plan for eastern Europe that includes loans and investment in private and public-sector projects including infrastructure, corporations and the financial industry.
Dinkic said another 100 million euros from the EIB will finance infrastructure projects, Dinkic said. Ultimately, the EIB funds will “replace the government’s loan subsidies” in the course of 2013, he said.
The government adopted a three-year fiscal strategy late year to narrow the budget gap to 1 percent of gross domestic product in 2015 and public debt to 58.4 percent of GDP in 2015 from its peak next year of 65.2 percent of GDP as economic growth picks up to 3.5 percent in 2014 and 4 percent in 2015, after a 2 percent expansion next year.
The economy will contract 2 percent this year, the International Monetary Fund said on Nov. 20 and the government is expected to pursue policies that will lead to lower debt without choking economic growth.
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