“In the structure of Serbia’s public debt in 2010, the share of debt (money owed to foreign governments) was 1%. Now, that share is 14% with Serbia owing the biggest amount of money to China. When one takes into account the current Chinese loans and what is still planned and will be activated soon, one comes to the conclusion that each adult citizen of Serbia will owe the Chinese at least 1,000 euro. This is a worrying level of indebtedness and the problem is that these agreements have been concluded in a non-transparent environment, without respect for competition,” says Ivana Pavlović, editor-in-chief of Nova Ekonomija magazine.
“Our level of indebtedness towards the Chinese government is 4% of Serbia’s GDP, but it will increase when it is activated as planned. It is good that the government has planned to reduce the level of debt and deficit, but besides the external risks of rising inflation and interest rates, there are also internal risks, such as the fact that public companies will have to pay guarantees,” Pavlovic said, adding that “there is probably no threat of so-called Montenegrin scenario happening in Serbia” when it comes to Chinese loans.
Looking at the new draft laws announced by the Finance Minister, which cover three areas – infrastructure construction, ecology and improvement of the public sector – of a total value of 768.8 million euro, Ivana Pavlović says that it is difficult to ascertain whether new loans are necessary and adds:
“For years, experts from independent bodies that monitor public finances have pointed out that the burning question is whether we need to invest in all types of infrastructure. The answer is ‘yes’. We need to invest in road infrastructure, public sector reform and accomplishing the green agenda goals.”
Another difficult question, she says, is how to get back the money spent. “The answer to this question should concern us all because it should be clear to citizens that the next generations will be burdened with this debt. This means that this debt will be repaid by our children and grandchildren,” Pavlović said.
She underlined that the level of public debt would have reached 60% of GDP by the end of the year, which is a lot for an emerging country like Serbia and its development level.
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