President of the Fiscal Council, Pavle Petrovic, said that the greatest risk for mid-term public finances stability were unreformed public and state companies and high civil servant wages.
In an interview with the Belgrade NIN weekly, Petrovic said the national airliner, Air Serbia’s business was unsustainable even before the crisis caused by the coronavirus pandemic.
“If we exclude state subsidies that are going towards settling of JAT’s old debt, the company had an average annual loss of more than 20 million euro from 2015 to 2019, instead of the reported profit,” Petrovic said.
According to him, “there are also hidden liquidity problems since the company failed to cover due liabilities with inflows from regular operations, which is a deficit that was compensated by borrowing.
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“Accumulated losses have ‘eaten’ the company’s capital, which in the formal sense means that the conditions for bankruptcy have been met,” said Petrovic.
He added the pandemic was not the direct cause of the problems but had exposed them.
“Instead of the regular cash deficit of 30 million euro in 2020, the company has a deficit of 60-70 million euro. When we add the liabilities due to be paid this and next year, we can conclude the company will need at least 200 million euro just to survive 2021,” Petrovic said.
He added that “a thorough reform will be necessary for sustainable business, which is why subsidies should be conditioned by the obligation to restructure. This is the practice that European countries apply in similar situations.”
Speaking about the wages, Petrovic said the problem was that “they are not systematically regulated and their growth is not linked to economic parameters. If public sector wages rise relatively strongly even in times of crisis, it is difficult to expect such practices to be easily abandoned during the economic recovery.”
He recalled that the introduction of a comprehensive system of pay grades, initially announced for 2015, was postponed again for 2022.
This post is also available in: Italiano