Serbia Targets Assets to Fix Budget, Get World Bank LoansMisha Savic
Serbia will sell or turn around hundreds of unprofitable state-owned companies to cut the amount they drain from the budget via subsidies and to secure $500 million in World Bank loans.
The government will address the first 153 “most critical” companies, including the country’s sole copper mine and a chemical producer, by the middle of 2014, Economy Minister Sasa Radulovic told a conference in Belgrade today. The World Bank will lend $250 million to Serbia early next year and the same amount later in 2014 if it is successful, said Dusko Vasiljevic, a World Bank private sector specialist.
The companies, which employ more than 51,000 people, “create a hole in the budget, and at the same time, we have no growth,” Radulovic said. “They are poisoning the market and they cost a lot.”
Prime Minister Ivica Dacic’s government announced a battery of measures to cut the budget deficit and rein in debt on Oct. 8 after his deputy Aleksandar Vucic said the Balkan state was “virtually on the verge of bankruptcy.”
It’s also trying to secure a financing backstop from the International Monetary Fund and reassure investors who have pushed borrowing costs to near the 7 percent level that have forced some countries in the euro area to seek bankruptcy.
The list of companies includes RTB Bor, the Balkan country’s sole copper mine and smelter, coal miner JP PEU Resavica, chemical company Petrohemija AD and machinery maker Prva Petoletka Holding, each with a few thousand employees.
The government will sell stakes, increase capital and finding investors for the companies, while shutdowns remain a possibility if all else fails, Radulovic said. Keeping these and another 419 state-owned companies, with 35,000 workers, afloat, costs the state more than 750 million euros ($1.03 billion) a year, he said.
More than half of the companies have gone through failed sales over the past decade, and the latest effort is the “beginning of the end of privatization,” Radulovic said.