Soaring public debt in Serbia

Serbia’s public debt immediately grew by 80 million EUR the moment the U.S. Federal Reserve raised its key interest rate. This, seemingly small detail has affected Serbia’s public finances greatly. The Reserve raising its interest rates is a result of a faster growth of the US economy and is good news for America, but not for Serbia.

“We are on a good path, a much safer one that other countries. Today, external factors are not too much of a problem for us because Serbia has economic stability that is based on orderly public finances”, the Serbian PM, Aleksandar Vucic commented on the U.S. Federal Reserve move.

The U.S. Federal Reserve has decided has raised its benchmark interest rate by 0.25%, only the second increase in a decade. The central bank voted unanimously to raise the key rate to a range of 0.5% to 0.75%, citing a stronger economic growth and rising employment.

A third of the Serbian public debt, which stands at around 24 billion EUR, is in U.S. dollars. So far, nobody could have estimated in which way the stronger dollar affect could paying off the loans that Serbia took which are indexed in this currency. Following Donald Trump’s win at presidential election, the exchange rate varies from 116 to 118 dinars for 1 US dollar. However, the increase in the U.S. key interest rate has affected the currencies across the world in a negative way.

(Vecernje Novosti, 15.12.2016)

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