Serbia’s Public Debt Management Strategy for 2027–2029 presents a relatively conservative debt trajectory, built around gradual debt-ratio reduction, active refinancing, euro-oriented currency risk management, deeper dinar bond-market development, and continued use of international capital markets where pricing is attractive. The strategy is not a crisis document; it is a market-access and risk-optimization document. Its central message is that Serbia expects to keep general government debt below the Maastricht-type 60% of GDP threshold and reduce it further to 43.9% of GDP by end-2029, while central government debt is projected at 43.4% of GDP under the baseline scenario.
The debt path is framed as a continuation of the post-2015 consolidation trend. Central government public debt fell from 67.2% of GDP at end-2015 to 44.4% at end-2025, and stood at 41.8% of GDP at end-March 2026. General government public debt at end-March 2026 amounted to RSD 4,657.0bn, or around EUR 39.66bn, equal to 42.1% of GDP. Of that amount, RSD 4,421.4bn was direct central government debt, RSD 199.3bn was guaranteed debt, and RSD 36.3bn was non-guaranteed local government debt.
The projected debt profile is moderate but not without refinancing intensity. Debt-service obligations remain large in nominal terms. Principal repayments, including buy-back operations, are projected at RSD 816.7bn in 2026, RSD 856.0bn in 2027, RSD 822.7bn in 2028 and RSD 766.5bn in 2029. Interest payments rise from RSD 211.8bn in 2026 to RSD 250.2bn in 2029. Total principal and interest payments decline as a share of GDP from 9.3% in 2026 to 7.4% in 2029, but the numbers show that Serbia will remain an active issuer and refinancing borrower throughout the period.
The baseline general government debt forecast is 44.7% of GDP in 2026, 44.3% in 2027, 44.1% in 2028 and 43.9% in 2029. Central government debt is projected at 44.3% of GDP in 2026, 43.8% in 2027, 43.6% in 2028 and 43.4% in 2029. This is a shallow decline, not a dramatic deleveraging cycle. The strategy assumes that nominal GDP growth, a positive primary balance and controlled exchange-rate exposure will offset interest costs and project-loan disbursements.
The currency structure remains the key vulnerability. At end-March 2026, Serbia’s public debt was still predominantly foreign-currency denominated: 60.9% in euros, 21.4% in dinars, 12.0% in US dollars, 5.6% in SDR, and 0.2% in other currencies. The strategy openly acknowledges that the dinar share has fallen from 30.5% at end-2020 to 21.1% of central government debt by end-March 2026, mainly because external borrowing was cheaper or more accessible during recent market cycles.
This is why the strategy gives special weight to dinarization. The long-term target is to keep dinar-denominated debt at no less than 30% of total public debt over the medium term. In practice, that means Serbia wants to return toward a deeper domestic-currency funding base, but without forcing dinar issuance at any cost. The document is pragmatic: dinarization is desirable for risk control, but the state will still use foreign markets where funding costs, investor appetite and maturities are more favorable.
The second major currency-management pillar is euro concentration. The strategy wants at least 65% of foreign-currency debt to be euro-denominated, including future borrowing and related hedging transactions. This reflects Serbia’s de facto currency-risk logic: the euro is the most important reference currency for Serbia’s trade, banking, investment and macro-financial environment, while dollar debt introduces additional volatility against both the dinar and the euro.
Serbia has already used derivatives aggressively to reduce dollar and non-euro exposure. The document highlights repeated swap transactions that converted liabilities denominated in US dollars, Chinese yuan and UAE dirhams into euro obligations. The share of US dollar-denominated debt fell from 33.9% at end-2016 to 12.1% at end-March 2026. Recent examples include the June 2024 USD 1.5bn ESG Eurobond, swapped into euro obligations at a fixed 4.754%, and the May 2026 USD 1.25bn ten-year Eurobond, swapped into euro debt with an effective coupon of 4.66%.
The May 2026 Eurobond transaction is strategically important. Serbia issued three tranches: EUR 1.0bn five-year bonds at 4.25%, used for early redemption of bonds maturing in 2027; EUR 900mn twelve-year green bonds at 4.875%, earmarked for eligible green investments such as railway modernization, rolling stock and the Belgrade Metro; and USD 1.25bn ten-year bonds at 5.50%, immediately swapped into euros at the effective 4.66% coupon. This shows the core financing pattern: international market access, liability management, ESG/green funding, and post-issuance hedging.
Credit rating is another important part of the strategy. Serbia’s sovereign position improved after S&P upgraded the country to investment grade, assigning BBB- with stable outlook on 4 October 2024, reaffirmed in March 2026. Fitch kept Serbia at BB+ with positive outlook, while Moody’s confirmed Ba2 stable. The strategy expects investment-grade status to broaden the investor base, especially among institutions previously restricted from buying non-investment-grade sovereign bonds, and to lower borrowing costs over time.
The domestic market agenda is equally important. Serbia’s dinar benchmark bonds have been progressively included in the J.P. Morgan GBI-EM Global Diversified Index, with additional benchmark bonds added in 2024, 2025 and 2026. Clearstream access has already improved settlement for foreign investors, and the authorities are working toward further post-trade integration, including Euroclear-related settlement improvements. These steps are intended to reduce transaction costs, increase liquidity, deepen the foreign investor base and make dinar securities more investable.
The strategy’s risk framework covers refinancing risk, exchange-rate risk, market risk, liquidity risk, credit and operational risk, and concentration of debt-service costs. The practical measures are conventional but important: longer maturities, smoother annual repayment profiles, increased use of medium- and long-term dinar instruments, derivatives for exchange-rate protection, external debt mainly in euros, and cash balances sufficient to cover at least four months of obligations.
Interest-rate risk remains visible. At end-March 2026, 65.7% of general government public debt was fixed-rate, while 34.3% was variable-rate. Among variable-rate obligations, EURIBOR dominated with 71.9%. The long-term strategic target is to keep variable-rate debt within 25% ± 5%, maintain Average Time to Refixing at a minimum of 5.0 years, and keep the weighted average interest rate on domestic-currency debt below 6.0%.
The strategy compares four borrowing alternatives for 2027–2029. S1, the baseline, combines domestic and foreign-currency funding, with a slightly higher foreign-currency share. S2 assumes financing through US dollar Eurobonds. S3assumes euro-denominated Eurobonds. S4 is a full additional dinarization strategy based on twelve-year dinar securities. The preferred baseline is essentially a blended strategy, balancing cost and currency exposure rather than maximizing dinarization immediately.
The stress tests show that exchange-rate shock is the most important debt-ratio risk. Under the baseline, central government debt reaches 43.4% of GDP in 2029 under S1. A 15% depreciation of the dinar against all currencieswould lift the ratio to 46.9% under S1, 47.4% under S2, 47.3% under S3 and 46.1% under S4. The full-dinar S4 strategy performs best under exchange-rate stress, but it has higher cost characteristics in the baseline.
Interest-rate shocks affect the interest bill more than the debt stock. Under the baseline, interest payments in 2029 are projected at 1.8% of GDP under S1 and 1.9% under S2–S4. Under a more severe interest-rate shock, interest payments rise to 2.2% of GDP under S1, 2.4% under S2 and S3, and 2.6% under S4. This is the main trade-off: dinarization reduces exchange-rate risk, but can raise domestic interest-cost exposure if local yields are high.
The debt portfolio indicators underline the same balance. Under S1, nominal debt reaches 43.4% of GDP, the applied interest rate is 4.47%, total Average Time to Maturity is 7.3 years, Average Time to Refixing is 5.0 years, fixed-rate debt is 72.3%, and foreign-currency debt is 71.8%. Under S4, foreign-currency debt falls sharply to 39.5%, but the applied interest rate rises to 4.74% and interest-payment risk is higher.
The strategy therefore does not treat dinarization as a free lunch. It recognizes that a bigger dinar debt share improves sovereignty and exchange-rate resilience, but can be more expensive and more exposed to domestic monetary conditions. Serbia’s actual policy is likely to remain hybrid: use dinar benchmark issuance to deepen the local curve and meet strategic targets, use euro and ESG/green Eurobonds for scale and maturity, and use swaps to remove unwanted dollar exposure.
The main macro driver of debt reduction is nominal GDP growth. In the central government debt decomposition, nominal GDP growth reduces the debt ratio by 2.7 percentage points in 2026, 3.5 percentage points in 2027, and 2.8 percentage points in both 2028 and 2029. Interest payments add around 1.8–1.9 percentage points annually, while the primary fiscal balance contributes positively to debt reduction. This makes growth and fiscal discipline the two pillars of the projected decline.
The document also signals that public investment will continue to be financed through project loans, including multilateral and bilateral credit facilities. This is important because Serbia is not pursuing debt reduction by cutting investment sharply. Instead, it is trying to keep the debt-to-GDP ratio stable or slightly declining while using borrowing to support infrastructure, living standards and growth-enhancing projects.
The guaranteed debt trend is positive. Guaranteed public debt fell from EUR 2.8bn at end-2013 to EUR 1.7bn at end-March 2026, while its GDP share declined from 7.6% to 1.8%. The strategy identifies tighter control of guarantees as one of the factors supporting debt sustainability, but also warns that activation of guarantees and liabilities elsewhere in the public sector remain implementation risks.
The market-development section is significant for investors. Long-term dinar-denominated instruments with original maturity of three years or more rose from 38.3% of outstanding dinar government securities at end-2013 to 100.0% by end-March 2026. Non-resident investors held 12.9% of outstanding dinar government securities at end-March 2026. This shows that Serbia has created a long-term dinar curve, but foreign participation remains moderate enough to leave room for growth if settlement, liquidity and credit rating conditions improve.
For the banking system and institutional investors, the strategy implies continued supply of medium- and long-term dinar securities, with benchmark reopenings and index-eligible lines likely to remain central instruments. For foreign funds, the combination of investment-grade S&P status, GBI-EM inclusion, Clearstream access and potential Euroclear settlement improvements makes Serbian local-currency debt more institutionally accessible. For the sovereign, the risk is that foreign participation can improve liquidity but also expose the domestic curve to global EM outflows.
From a fiscal-risk perspective, the weakest point is not the headline debt ratio, which is moderate, but the interaction between foreign-currency exposure, interest-rate conditions and investment-driven borrowing. A debt ratio of 43–44% of GDP is comfortable compared with many European sovereigns, but the portfolio is still heavily euroized and partially variable-rate. A dinar depreciation or higher EURIBOR path would not break the debt framework, according to the stress tests, but it would reduce fiscal space.
The overall assessment is that Serbia’s 2027–2029 debt strategy is credible, market-oriented and increasingly sophisticated. It uses the tools of an emerging-market sovereign moving closer to investment-grade behavior: liability management, buy-backs, benchmark issuance, index inclusion, green bonds, ESG bonds, cross-currency swaps and domestic market deepening. The projected improvement is gradual rather than spectacular, but the underlying policy direction is clear: keep public debt around the low-to-mid 40% of GDP range, reduce currency and refinancing risk, build a deeper dinar curve, and use improved sovereign credibility to lower long-term financing costs.
