Serbia plunges deeper into public debt

At the end of last year, Serbia’s total public debt totalled 26.7 billion euro, the highest amount in two decades. The lowest debt of 8.8 billion euro was recorded in late 2008, and it has been steadily growing ever since.

Professor at Belgrade’s Faculty of Economics, Ljubodrag Savić, explains that in economics, the amount of debt is never observed alone but it is important to note how much debt the state has, whether it is able to maintain it and what the borrowed money is spent on.

Serbia ended last year with a public debt of 26.7 billion euro, which was almost 2.7 billion more than the previous year. The debt’s share in the gross domestic product (GDP) also jumped from 52 to 57.4 percent.

Professor Savić says that the amount of public debt in itself may indicate something, but it is not enough.

“Very often the economists observe public debt in a relative sense by how much it burdens the country. It is essential to see how much it costs to service the public debt. If the country can afford it and settles its financial obligations regularly every year, then there is no problem,” he explains and adds:

“But if the country can’t afford this, it doesn’t matter how much debt you have. Then you’re in trouble and it’s going to be hard to find someone to give you a new loan, help you close the old one or pay back the interest. That means the country becomes insolvent.”

He notes that there are criteria that must be met by all countries that want to be members of the European Union, and also candidates, which say that public debt’s share in a country’s GDP should be below 60%.

Serbia is currently below that limit but did exceed it in the last two decades – in 2014, when the share of debt in the national GDP was 66.2%, in 2015, when it hit a record 70% and in 2016, when it was 67.7%.

Professor Savic recalls that in 2009, during Mirko Cvetković’s term as prime minister, Serbia passed the Law on Public Debt, where the state pledged not to take any more foreign loans if they increased the public debt beyond 45% of the GDP share. Since 2012, Serbia has consistently violated this legal provision.

Professor Savic also warns that such a situation will not last and that it is necessary to be mindful of the future: “When the economies recover, interest rates will definitely go up. And we are not a country that can repay the loan whenever it wants; rather we will continue to borrow in the future too.”

(Nova, 29.03.2021)



This post is also available in: Italiano

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