Serbia Names McKinsey’s Lazar Krstic as Finance MinisterGordana Filipovic
Serbian Prime Minister Ivica Dacic will name a McKinsey & Co. associate in New York to lead the Finance Ministry as the government prepares for talks to join the European Union and win a new international loan accord.
Lazar Krstic, a 2007 graduate of Yale University according to his LinkedIn page, agreed to take the job, Sinisa Mali, the adviser of Deputy Prime Minister Aleksandar Vucic, said by phone today in Belgrade. At age 29, according to newspapers Blic, Politika and Novosti, he would be the country’s youngest-ever Finance Ministry head.
“It’s not only about the measures, it’s about a vision of how Serbia could look five years from now,” Krstic told state TV broadcaster RTS in his first public comments after accepting the post. He said he would have the necessary political support and the Finance Ministry would prepare its new agenda next week.
Dacic is planning to present members of a revamped cabinet to lawmakers on Aug. 26 after he and Vucic’s dominant Serbian Progressive Party ejected a coalition partner in a move that briefly raised the specter of early elections. Following two economic recessions in three years, Vucic wants the new government to consolidate public finances, lay out a foundation for economic growth and prepare for a possible new standby agreement with the International Monetary Fund and the EU.
Yields on the Serbian 10-year Eurobonds maturing in 2021 rose 11 basis points, or 0.11 percentage point, to 7.076 percent while the dinar was little changed at 113.9220 to the euro by 10:10 p.m. in Belgrade, data compiled by Bloomberg show.
“Krstic is our message to all the young, creative and intelligent people, who unfortunately had to leave this country in the past decades, that the doors are wide open,” Milenko Dzeletovic, who coordinates the Progressive Party’s economic team, told state TV broadcaster RTS yesterday.
The new minister will be charged with ending a practice of “excessive borrowing,” attracting foreign investment, easing corporate taxes and supporting exports to boost job growth, Dzeletovic said, according to Tanjug news agency .
The tasks facing him in September include the sale of a $1 billion Eurobond to ensure smooth budget financing through March 2014, a new revision of the 2013 budget, and a tender for the sale of Telekom Srbija, Belgrade newspaper Blic wrote today. Vucic is due to meet World Bank representatives in Belgrade tomorrow to seek a $200 million loan for the budget, Blic said.
Serbia averted early elections on July 31 after the Progressives agreed to oust then Finance and Economy Minister Mladjan Dinkic, a former central banker, and his political party from the cabinet. With the changes, the Progressives will control the Finance and Economy ministries, as well as the central bank, whose governor is a member of Vucic’s party. Though the Progressives proposed Krstic for the post, he isn’t a member of the party.
Serbian governments have previously tapped McKinsey employees for policy maker positions. After the 2000 ouster of former strongman Slobodan Milosevic, the government appointed McKinsey’s Bozidar Djelic, a former adviser to the Russian and Polish governments, as head of finances and Radovan Jelasic as central bank vice governor.
The new cabinet’s focus should be to secure state financing and cut borrowing needs over the medium term as well as narrow the budget deficit, Branko Hinic, the central bank’s chief economist, said in Belgrade yesterday.
Timothy Ash, chief emerging-markets economist at Standard Bank in London, said that as a “relative unknown” both in Serbia’s domestic political scene and to foreign investors, Krstic should pursue a new agreement with foreign aid lenders.
“We think it is vital for Serbia to quickly sign up to a new IMF program to provide sufficient assurance to investors,” Ash said in a research note today. “This will be key to ensuring that the government is able to come to market, and successfully issue a new Eurobond by September.”
Krstic is inheriting a seven-month budget gap of 83.3 billion dinars ($976 million), a decline of 26 percent from a year earlier, the Finance Ministry said in an e-mail today. Public debt rose to 19.07 billion euros ($25.5 billion) or 1.5 billion euros more than in 2012, as the government stepped up borrowing abroad to finance the deficit and repay debt.
Serbia targets a full-year fiscal gap of 178 billion dinars, or 4.7 percent of GDP, according to a revised 2013 budget. The spending framework includes plans for the sale or closing of 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 put 54,000 people out of work.