The President of the Fiscal Council of Serbia, Pavle Petrović, said that next year, Serbia will have to borrow at least three to four billion euros, because about four billion euros of debt is due for payment.
This borrowing will not be favourable, since interest rates are now at least seven to eight percent, he warned during the presentation of the Report on the work of the Fiscal Council for 2021.
According to him, the cost of Serbia’s borrowing is high, even compared to the countries of Central and Eastern Europe, because the interest rate is about 50 percent higher for Serbia than for these countries. “This also applies to the old debt, but also to the interest rates,” said the president of the Fiscal Council.
Public debt should be 50 percent of GDP
According to the Fiscal Council analysis, Serbia should strive for public debt in the amount of 50 percent of the gross domestic product (GDP), he says and adds that the public debt in 2021 was 57 percent of GDP, and that according to the first estimates of the Fiscal Council, public debt in 2022 will again stand to around 57 percent.
“That is important because, after the fiscal consolidation done in the period from 2014 to 2017 and several years after that, the debt was reduced to 52 percent of the country’s income, which was good,” Petrović said.
He pointed out that, when the coronavirus pandemic hit, that allowed Serbia to have enough fiscal room to solve the economic and health crisis, without worrying about the state of debt and deficit.
“As a result of those measures, the debt grew to 57 percent of GDP, which was justified because of the crisis. However, the next crisis is coming and that is why it is necessary to return that debt to 50 percent. Debt in the amount of 60 percent of GDP, according to Maastricht, is not relevant for Serbia, and one of the main reasons is the cost of borrowing in Serbia compared to the countries covered by the Maastricht criteria”, Petrović concluded.
(Biznis i Finansije, 25.10.2022)
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