Serbia Announces Belt-Tightening Measures
Serbia on Friday announced a series of belt tightening measures worth around one billion euros ($1.3 billion) to reign in the budget deficit which is running almost double the target.
"Half of this sum will be saved by cutting costs and the other half by boosting income through raising certain taxes," Prime Minister Ivica Dacic said in a statement published on the government website.
The measures are needed to avoid a "budget blockade" or Serbia "plunging into a debt crisis", he warned.
Dacic added that the government also plans to eliminate around a hundred special duties levied on companies and close unnecessary government agencies, without going into more specific details. The measures are part of a budget revision that will be voted on by parliament on Monday.
The 2012 budget forecast a deficit of 1.19 billion euros, or 4.5 percent of gross domestic product (GDP), but Dacic said the deficit was already up to 7.0 percent at the moment. He added that public debt could rise to 60 percent of GDP by the end of the year.
His government, sworn in less than two months ago, is hoping to restart talks with the International Monetary Fund which in February froze a one billion euro stand-by loan because Belgrade did not keep to figures agreed for the 2012 budget.
Several weeks ago the Fitch rating agency revised its 2012 fiscal deficit forecast to 6.5 percent from 5.5 percent of GDP back in May this year.
While it affirmed the country's long-term foreign and local currency sovereign credit ratings at "BB-", Fitch revised its outlook to negative. Among other things Fitch cited a recent law that increased parliamentary control over the national bank which it said dented investor confidence.
The 2012 budget is based upon a forecast of 1.5 percent economic growth but Finance Minister Mladjan Dinkic recently warned that the economy could contract by as much as one percent this year.
Source: Agence France Presse
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