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Foreign Creditors Hold Dominant Position in Serbia’s Public Debt Landscape

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The total public debt of Serbia at the end of 2023 amounted to EUR 36.15 billion, three billion more than at the beginning of the year, but in relation to GDP, it decreased to 52.3%.

Within the public debt, Serbia’s total direct obligations were EUR 34.34 billion, while indirect obligations were 1.81 billion.

Foreign creditors dominate our public debt, with external public debt amounting to EUR 25.36 billion, while domestic debt was 2.5 times smaller – 10.79 billion.

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Looking at the currency structure of public debt, as much as 78.3% is denominated in foreign currencies. The majority of the debt at the end of last year was in euros, 57.7%, while the dollar debt accounted for 13.4% of the total public debt. A smaller portion, 6.7%, was owed in SDR-special drawing rights, the accounting currency of the IMF.

The majority of Serbia’s public debt is in bonds

By far, the largest portion of Serbia’s public debt is in bonds. Regarding eurobonds, we owe EUR 8.93 billion, while domestically issued bonds, both in dinars and foreign currency, amount to approximately 9.1 billion, as reported by Danas.

Long-term securities denominated in dinars contribute to a debt of EUR 7.2 billion, while debts from long-term bonds denominated in euros are around 1.9 billion.

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Third on the list are loans from foreign governments, with a debt of 3.2 billion euros, followed by loans from commercial banks, totaling 2.8 billion euros owed by Serbia.

Serbia owes 2.6 billion euros to the Export-Import Bank of China (China Exim Bank).

Following them are international financial institutions, with the country owing 2.3 billion euros to the International Monetary Fund (IMF), 2.1 billion to the International Bank for Reconstruction and Development, and 1.8 billion euros to the European Investment Bank.

In comparison to the end of 2022, public debt increased by nearly three billion euros in 2023. However, at the end of the year before last, the debt-to-GDP ratio was 55.1%.

The reason the public debt decreased relative to GDP, despite a nominal increase of three billion euros, is that the GDP increased by almost nine billion euros during 2023.

Compared to the end of 2021, the public debt increased by six billion euros last year. At that time, Serbia’s public debt amounted to 30.13 billion euros, accounting for 56.5% of the GDP.

Over the course of three years, the nominal debt increased by 9.5 billion

If we go back to the year 2020, according to the Ministry of Finance data, the public debt amounted to 26.7 billion euros. This means that over the course of three years, the nominal debt increased by a total of 9.5 billion.

In tandem with the increase in the absolute amount of public debt, interest rates have also risen from record lows to levels similar to those during the global financial crisis.

There is a noticeable increase in the interest rates at which our country borrowed based on these Eurobonds, spanning from 2020 to 2023.

In 2020, our country issued 10-year eurobonds with a value of 1.2 billion dollars at an interest rate of 2.4%. Three years later, in January 2023, we issued eurobonds with the same maturity, but this time worth one billion dollars, with an interest rate of 6.8%.

The impact of the rising interest rates on the budget is best illustrated by the fact that public expenditures for interest payments increased by 38.5 billion dinars during this period. In 2023, 146.6 billion dinars or more than 1.2 billion euros were disbursed from the budget for interest payments.

In 2020, these obligations amounted to 108.1 billion dinars, equivalent to approximately 919.4 million euros at the average exchange rate for that year.

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