Economist Goran Radosavljević expressed concern over Serbia’s public debt of €38.2 billion, highlighting not the absolute amount but the rapid pace of borrowing and the allocation of loans. He explained that Serbia has been unable to repay loans for a decade, continuously refinancing existing debt with new loans. Recently, the government struggled to repay a loan from the UAE Development Fund and took on a new loan with a significantly higher interest rate of 4.5%, compared to the previous 2%.
On an emergency session, the Serbian Parliament approved amendments to agreements with the UAE Development Fund, extending repayment terms and increasing interest rates. The Ministry of Finance proposed deferring the repayment of the $2 billion debt for an additional two years, with new terms including a 4% interest rate plus administrative fees.
Radosavljević criticized the lack of transparency about the use of previous funds and the decision to take a more expensive loan, compared to cheaper alternatives from international financial institutions like the European Investment Bank (EIB), World Bank and European Bank for Reconstruction and Development (EBRD). He noted that these institutions offer lower interest rates for infrastructure projects, contrasting with the higher rates on the current loans.
He also questioned the process for acquiring loans from the Postal Savings Bank for the National Stadium’s construction, highlighting a lack of competitive bidding and transparency. Radosavljević argued that using budget funds for infrastructure is preferable, but credits are being used instead, leading to concerns about the effectiveness of investments.
He warned that the rapid increase in debt, particularly in the last two to three years, is unsustainable and may not yield significant returns on investment. He expressed skepticism about the future economic benefits of projects like the National Stadium and the Belgrade Waterfront, noting the financial strain of maintaining these investments.
Radosavljević concluded that while the government may avoid immediate crisis through continued borrowing, the long-term outlook is uncertain, particularly if global economic conditions worsen. He stressed the need for prudent fiscal management and warned that increased interest rates and growing budget deficits could exacerbate Serbia’s financial challenges.
