Serbia’s energy costs have risen to two percent of GDP

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Serbia’s total energy costs rose to 2% of GDP due to problems in domestic electricity production that overlapped with the growth of global energy prices in the winter of 2021/22, the IMF estimates in the second review of the results of the advisory arrangement with Serbia. That is more than what we allocate for science and culture together: we allocate 0.46 percent for science, and one percent of GDP for culture. 

The IMF estimates that negative short-term risks still exist and that they include a potentially prolonged war in Ukraine with further pressures on energy and commodity prices, supply chain disruptions and lower external demand, as well as a continuing lack of production in the energy sector.

“Reforms in the energy sector are urgently needed, including the restoration of a secure supply.”

The strategy for the state Electric Power Industry of Serbia (EPS) and the timely adoption of the National Climate and Energy Plan will provide an essential framework for investments in energy, especially in renewable sources, according to the IMF.

We remind you that Serbia is in the process of preparing the National Energy and Climate Plan (NEKP) of Serbia for the period from 2021 to 2030, with a vision until 2050, the draft of which was published on the website of the relevant ministry. 

The National Energy and Climate Plan will include targets for increasing the share of renewable energy sources in final energy consumption, for increasing energy efficiency and for reducing greenhouse gas emissions. It will also contain measures to achieve these goals and implement the energy transition.

Energy companies EPS and Srbijagas have been a cancer of Serbian economic reforms for some time.

According to the assessment of the Fiscal Council, EPS’s problem is low investments, redundancy and unfavorable structure of employees, weak control of salaries, connection with losers, losses and thefts of electricity, low price, public procurement, etc. 

To this should be added poor management and declining coal quality, more frequent breakdowns and loss of production capacity, increased use of fuel oil (environmental problem) …

During the current winter season, the Electric Power Industry of Serbia spent about 500 million euros on the import of electricity from abroad, and the main reason for that is insufficient domestic coal production and accidents at the “Nikola Tesla” Thermal Power Plant, which caused the country’s electricity collapse.

The Government of Serbia recently approved (EPS) to import four million tons of coal by the end of 2023, in order to ensure the uninterrupted operation of Obrenovac’s thermal power plants, which cover half of the country’s electricity needs. 

Why is so much money spent on electricity? The first problem is that a large amount of money is spent on importing electricity in the winter when it is most expensive. The second is that if the Electric Power Industry of Serbia did not have a problem with domestic production, it could export surplus electricity and make good money on its sales. 

We remind you that EPS lost half a billion euros on electricity imports, said Pavle Petrović, the president of the Fiscal Council of Serbia, recently. According to him, in order to be able to import the missing quantities of electricity, EPS was forced to take a loan of 300 million euros, and the big question is whether the company will manage to repay the debt, so the loan will most likely be returned from the state budget.

The state also provides Srbijagas with the difference between high purchase and frozen gas sales prices, Nova Ekonomija writes.

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