- A day without a government costs 50 million euros -
Only by taking rigorous measures of economoy can Serbia evade the public date crisis resulting in uncontrolled drop in the national currency value, high inflation and unemployment. Economic experts believe that the consumption boosting model applied by some countries in the euro zone is not a good solution for Serbia. More in the Economic Review, prepared by Zorica Mijušković.
The Serbian public debt amounts to 50% of the GDP and is expected to grow by anothr 5% by the end of 2012, with another 2.5 billion euros’ debt taken for deficit financing. The new government should immediately reduce the fiscal deficit by half in order that it reach zero level in 2016. The president of the Fiscal Council, Pavle Petrović, says that the medium-term measures are aimed at rendering public finances sound for good. The freezing of salaries and pensions would save at least 300 million euros, with additional 200 million should a tax reform programme including VAT increase to 22% start as of autumn. Expenditures should be additionally cut down to provide another 400 million euros in the budget.
In the opinion of economic experts, Serbia needs a strong fiscal consolidation programme with an increase of investment consuption and public investments envisaged by this year’s budget. It is such consumption that boosts total economic activity, the president of the Serbian Economists’ Association, Aleksandar Vlahović, assesses, adding that one should start with more fiscal responsibility and with a drastic reduction of the budget deficit.
Economist Boško Mijatović believes that Serbia’s debts are too high and that a tortuous course of reforms, expenditures cutdown, budget balance and similar measures is ahead of us. One of the first moves of the new government should be to improve the tax collection method as the tax administration is not functioning as it should be and it is there that the initial reserves of the state budget are located, he says.
Analysts warn that the new Serbian government should be formed as soon as possible as each day of delay costs 50 million euros of foreign currency reserves. The first move should be an invitation to the IMF for resuming credit arrangement talks and resolving the problem of the reduced capital inflow and foreign remittances. The central bank believes that the national currency’s value will improve when the new government is formed, especially referring to the executive authorities. Ever since the presidential elections were over the dinar exchange rate has been dropping abruptly daily. In five days alone, the dinar has lost 2% of its value, although the central bank sold 80 million euros in the interbank foreign currency market. However, there is a level below which the central bank will not be spending foreign currency reserves on the national currency.