Serbia entered 2020 with a public debt of 24.3 billion euros (about 53 percent of GDP), while the country’s indebtedness currently exceeded 27 billion euros, which is slightly more than 58 percent of the gross domestic product, Special Advisor to the Fiscal Council of Serbia Slobodan Minic, told biznis.rs
He pointed out that it is expected that by the end of the year, Serbia’s public debt will approach the level of about 60 percent of GDP, and it remains to be seen whether the Government will come up with some new measures whose implementation would require additional government borrowing.
MInic points out for biznis.rs that the general worsening of economic trends also contributed to the increase in public debt in 2020, but that was primarily the price of measures taken by the Government to mitigate the negative consequences of the new crisis.
Many today state that the level of public debt should not exceed 60% of GDP, which is foreseen by the Maastricht agreement for EU countries.
inic says a public debt level of 60 per cent of GDP is often used as an indicator of long-term fiscal sustainability.
“The logic is simple: if a country has public debt significantly below that level, it can usually borrow heavily in an emergency with a limited risk of falling into a public finance crisis,” he says.
He points out that international experiences indicate that for a country like Serbia, the appropriate limit of public debt is about 50 percent of GDP, which is basically recognized in the current national fiscal rules (45 percent of GDP plus debt based on restitution).
Minic says that keeping the public debt below 60 percent of GDP this year is important primarily so that we do not stray too far from the goal we would have to strive for in the medium term, which is to reduce it to below 50 percent of GDP.
“It is even more important that the Government envisages a sufficiently small fiscal deficit in the budget for next year (of about two percent of GDP), which would ensure that Serbia’s public debt is firmly on a declining path again,” Slobodan Minic concluded, N1 reports.
