Serb Lawmakers Clear Revised 2013 Budget Targeting 4.7% DeficitGordana Filipovic
Serbian lawmakers approved the revised 2013 budget, raising the deficit target to 4.7 percent of economic output and endorsing the government’s plan to sell or close 179 companies that employ 54,000 people.
Lawmakers voted 129 to 55 in favor of the plan to increase the shortfall to as much as 178 billion dinars ($2 billion) from an initially planned 122 billion dinars, or 3.6 percent of gross domestic product. The three-member Fiscal Council, appointed by parliament to oversee fiscal compliance, sees the gap at about 200 billion dinars. It reached 98 billion dinars at end-June.
The revised budget is part of Prime Minister Ivica Dacic’s effort to stabilize public finances and will be accompanied by “other reforms” which will take time, Finance Minister Mladjan Dinkic told lawmakers on July 1 when presenting the plan. “We have cut spending wherever possible” and spared public wages and pensions, fearing that the cut would further curb demand and slow growth, he said.
Serbia ended 2012 with a deficit equivalent to 7.75 percent of GDP, the biggest shortfall since the 2000 ouster of former strongman Slobodan Milosevic. The deficit may soar to 8.3 percent this year without additional cost cuts, the International Monetary Fund said July 3.
The government plans to spend $11.7 billion and collect revenue of about $9.8 billion. The revised budget raised financing needs to 631 billion dinars from 554 billion dinars. The plan includes $2.5 billion of Eurobonds, leaving Serbia with an outstanding issue of $1 billion after selling $1.5 billion of seven-year bonds on Feb. 14.
The government will find it “challenging” to raise 2.7 billion euros ($3.5 billion) by the end of 2013 and a further 4.5 billion euros in 2014 to finance the deficit and repay maturing principal on public debt, the Fiscal Council’s chairman Pavle Petrovic said yesterday, urging the authorities to seek a deal with the IMF to ensure lower borrowing costs.
The budget is based on a 2 percent GDP growth projection this year, led by expanding industrial output and exports, year-end inflation of 5.5 percent and the current-account gap of 8.4 percent.
Serbia wants to sell or close 179 state-owned enterprises that have been subject to restructuring programs for 12 years and cost the government 750 million euros annually. The plan, to be implemented through 2014, may leave 54,000 people unemployed.