Serbian Yields Rise as Government Sells Less Debt Than Planned

Serbia sold less debt than planned in its biggest auction ever as borrowing costs increased on concern that the country will take more time to overhaul its public finances than the government has indicated.

The former Yugoslav republic raised 39.13 billion dinars ($367.6 million) in an offering of seven-year notes, short of the 50 billion-dinar target, the Serbian Debt Management Agency said in e-mailed statement Tuesday. The average yield was 12.34 percent, up from 11.99 at Dec. 17 sale of similar maturity debt, the highest in a year, according to agency data.

Premier Aleksandar Vucic is raising cash to finance the nation’s budget gap as he negotiates with the International Monetary Fund over a three-year program he said will be agreed on Feb. 23. The government’s fiscal shortfall will narrow to 5.9 percent of economic output this year from 6.6 percent in 2014, according to Finance Ministry estimates.

“Investors are concerned that the reform process may take longer to execute than currently planned given the complexity,” Martin Rea, a London-based strategist at UniCredit SPA, said by e-mail.

Under a Nov. 20 interim agreement with the IMF, Serbia pledged to cut its budget deficit to 3.8 percent of gross domestic product by 2017.

The government “has embarked in the right structural fiscal consolidation plan, the weak state of the economy will endanger fiscal objectives due to potentially lower-than-budgeted revenues,” Carlos Ortiz, another UniCredit economist, said by e-mail.

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