In 2024, Serbia will have to borrow about 6.5 billion euros in order to finance the deficit and pay off the old debt, but the borrowing conditions will be less favourable than before, warns the Fiscal Council. In the past, old debts were repaid at the interest rate of 3 percent, but now the interest rates range between 6 to 7 percent.
The Ministry of Finance says that public finances are stable, which raises the question of why the country borrows under such conditions and whether this can negatively affect the growing public debt which is expected to stand at around 53 percent of the gross national product at the end of this year.
Finance Minister Siniša Mali has also assured that there was nothing to worry about.
“We have no problem with the public debt. The interest rates we pay are still far lower than those of all neighbouring countries. If we need to get into debt, we can”, Mali added.
The Fiscal Council explains that Serbia’s less favourable borrowing is a consequence of the rise in interest rates throughout the world and the growing Euribor. The Council does agree that the public debt is drastically high, but doesn’t agree with the Finance Minister when it comes to the interest rates on loans.
“Looking at the Central and Eastern European countries, there they have somewhat higher interest rates on average. Ours, for example, is currently about 6 percent on bond yields, while Central and Eastern Europe averages between 4 and 4.5 percent. Several countries are in a somewhat similar situation like us, like Romania, but there are also regional countries that are in a much better position than we are, such as Slovenia and Croatia,” Slobodan Minic from the Fiscal Council notes.
The Fiscal Council points out that despite the high interest rates on new loans, Serbia is still not in danger of going into a debt-induced crisis, but they emphasize that the cost of public debt is getting higher, since this year around 1.5 billion euros will be paid in interest alone, which is the amount of the total subsidies that the Serbian government gives to businesses.
This post is also available in: Italiano