The new finance minister is in for a rough time ahead, according to economists who say that Sinisa Mali, if he is appointed finance minister, will be stuck between a rock and hard place when trying to maintain the fiscal balance and complete the reforms, but also the process of restructuring the public sector and state enterprises.
“It’s like sitting on two chairs – maintaining a macroeconomic balance,on one hand and restructuring the economy on the other, in accordance with the financial perspective”, says economist Dragan Djuricin, from the Serbian Association of Economists.
According to him, the most difficult problem will be the restructuring of the public sector and public enterprises, but also the privatization or termination of state-run enterprises that are not performing well economically, and burden the state budget.
Djuricin also says that a lot of work awaits the future Minister of Finance, but with a clear vision of development and agility, this can be achieved in the coming period.
He recalls that Serbia had significant results in terms of fiscal consolidation, and that this was the fifth consolidation programme since the time of Milka Planinc, who was the Prime Minister of the former Yugoslavia and who was known for accomplishing the same fiscal consolidation results.
“The main goal is to establish a fiscal consolidation, that is, the balance between tax revenues and expenditures, with the aim of reducing indebtedness, achieving better credit rating and increasing employment, as well as boosting general economic activities. Therefore, the new finance minister should continue with elimination of structural instabilities that our economy has inherited from the 1990s”, Djuricin adds.
Djuricin points out that Serbia, as a state, is also responsible to international financial organizations that help us in restructuring and on the road of economic repercussions. Djuricin notes that our public debt is still relatively high and should be lowered to 50 percent of GDP: “After the new finance minister is appointed, the new agreement with the IMF, with the validity from August 2018 to January 2021, will state the quantitative, indicative and other reform goals that the macroeconomic policy makers need to implement are very precisely defined.”
He reminds that the Ministry of Finance is responsible for the fiscal policy and the system together with the National Bank of Serbia (NBS), and that this year, for example, it is predicted that the trade balance deficit will be slightly below 6 percent, and that the goal is to be below 5 percent, in line with the IMF’s requirements.
Djuricin said that, also, the level of domestic investments should be increased, the tax system needs to be optimized through restructuring and digitization, and the government needs to change certain tax forms in order to stimulate investment and employment.
“These are the measures like the introduction of progressive depreciation, exemption from paying taxes in the case of reinvesting profits and others. They are all come under the competence of the Minister of Finance, who is supposed to provide a fiscal balance, and on the other hand, achieve the reform goals”, said Djuricin.
Economist Ivan Nikolic, from the Institute of Economics ,told Tanjug that the new finance minister would have to deal with pressing issues and would carry a great responsibility, adding that that certainly was not something that the future minister had not already faced in the past.
Nikolic underlined that the Ministry of Finance was a ministry with the biggest responsibility, and that in the past few years the Ministry of Finance has put emphasis on stabilization, while in the following years it will almost certainly have to focus on development: “I think that the work of the future minister will be directed towards a more efficient use of state assets. On behalf of the state, the Ministry of Finance manages state assets and this has to be done in a more efficient way. The Ministry will have to manage state investments more efficiently, capital expenditures have been growing, which is good, but it seems to me that their efficiency is not sufficient to ensure a sustainable growth in Serbia in the foreseeable future.”
Nikolic recalled that a major step forward was made in bringing public finances into line and achieving a stable macroeconomic framework: “In the coming period, the Ministry is likely to be focused on providing greater contribution to GDP growth, continuing to stabilize public finances and ensuring high liquidity of the state.”
He also says that the new minister is definitely going to have to deal with the agreements regarding a new arrangement with the IMF, but it remains to be seen what form will those agreements take, and whether they would be made at all.
Nikolic believes that it is not necessary for Serbia to have a new arrangement with the IMF at the moment, and that the Fund itself does not have great experience with these type of arrangements, the so-called Policy Support Instrument (PSI).
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