BELGRADE (Serbia), September 28 (SeeNews) – IMF Resident Representative in Serbia Bogdan Lissovolik said the Balkan country should aim for a budget deficit of 3.5% of gross domestic product (GDP) next year to strengthen its fiscal balance, local daily Blic reported.
“Our prognosis is that Serbia’s economy will begin to experience modest growth in 2010 of some 1.5%,” Blic (www.blic.rs) quoted Lissovolik as saying on Saturady.
“Based on this prognosis, aiming for a budget deficit of 3.5% of the projected GDP should, according to our opinion, establish the right balance between serious fiscal weaknesses and the building of confidence that would reduce deeper imbalances,” Lissovolik said.
The International Monetary Fund (IMF) agreed earlier this month to a rise in Serbia's 2009 budget deficit forecast to 4.5% of GDP from the 3.0% set initially under a 3.0 billion euro ($4.4 billion) loan deal in exchange for a comprehensive reform of the public sector. The IMF also decided to delay until October 20 the completion of its second review of the aid arrangement, tying the release of the second and third tranches, worth a combined 1.4 billion euro, to the findings of the upcoming mission. The Balkan country signed the deal with the global lender in March.
The financing of Serbia’s debt is risky because the country is mainly borrowing in foreign currency due to a shortage of liquid, deep, and long-dated markets for domestic debt, Lissovolik said.
“Other countries have much lower interest rates and longer maturity. Serbia needs lower deficits and cheaper financing in order to avoid the build-up of public debt,” he added.