Serbia chooses to get more expensive debts and spend how it wants

When the European Commission proposed a new three billion Euro package of macro-financial aid measures for the countries of the Western Balkans and other European Union partners late in April, Serbia crossed itself off the list.

Officials in Brussels said at the time that one of the criteria for countries to benefit from that package was to ask the IMF for emergency liquidity aid but Belgrade saw no need for that. Finance Minister Sinisa Mali also said that there is money enough in the budget to meet all obligations.

“At this moment, Serbia is completely stable, secure and we have no problem with our obligations. According to our projection that will remain the situation to the end of the year. We are following events in the world and we’ll see. Our projections and those of the national bank are always more conservative and we are completely prepared for an even worse scenario,” the minister said.

Nikola Altiparmarkov, a member of the national Fiscal Council, said that the country should take loans from international institutions. “Certainly yes, if there are loans from international institutions such as the European Union, that should be taken. I am saying that it seems that we did not have that opportunity to date, that is that it is not easy to apply to the European Union if it wants you to prove that you are having balance of payments problems… Becoming indebted on the capital markets will certainly be a challenge, maybe that will have to be at some higher rates than in the past but unfortunately that is inevitable for Serbia and other countries,” he said.

Mali is planning even more debt, to the tune of three billion Euro and 455 billion Dinars in the national currency (some 3.9 billion Euro) The minister did not specify how Serbia will increase its debt. N1 has learned that the government has decided to sell a large number of state bonds. Those sources mentioned two billion Euro.

The bond offer could be made on Serbia’s behalf by big global banks such as the Deutsche Bank, City Bank, Paribas and JP Morgan. The buyers would get guarantees from those banks that the operation will be safe. These bonds are usually sold with a due date of five to 10 years but the interest that is paid by the state is higher than the favorable conditions for loans from European financial institutions. On the other hand, the money from the sale of bonds can be used by the government as it sees fit with no obligation to explain what it was spent on.