The second package of assistance to the economy, which includes a two-month payment of 60 percent of the minimum wage, which amounts to about 150 euros, and a temporary one-month exemption from taxes and contributions will cost the budget and the state did not borrow for that, said Finance Minister Sinisa Mali.
However, “now” should probably have been added to this statement, considering that, according to the assessment of the Fiscal Council, it will be necessary to borrow another 2.5 to three billion euros by the end of the year to finance this year’s budget deficit and repay previous debts due this year. Total borrowing this year should be around seven billion euros.
In its analysis, the Fiscal Council states that the state has already borrowed most (about 60 percent), which primarily refers to Eurobonds of two billion euros, and this is probably the reason why the state has money in its account to pay these 530 million euros in the next few months.
The Council also notes that borrowing could be mitigated if the costs were paid from state deposits, and they estimate that at around 400 to 500 million euros. The biggest source of that money is the concession fee of Nikola Tesla Airport.
In addition, the state is planning to borrow officially, considering that according to the bond auction calendar, the issue of around 435 million euros is planned in the third quarter, both in dinars and euros.
Milojko Arsic, professor at the Faculty of Economics in Belgrade, estimates that by the end of the year it will be necessary to borrow at least another billion euros, and it all depends on how long the measures to help the economy will last and whether there will be other sectoral measures, tax collection and many other factors.
“The state has room to adapt. Let’s say that it slows down the infrastructural works and thus reduces the consumption, as it has already reduced those expenses by 20% in the budget rebalance. Then it seems that there is still some money in the state deposits, but that must be kept for emergency situations as a reserve and not everything can be spent. Also, the question is which of those funds is budgetary, and which of other state institutions, institutions, municipalities – whose money is in the treasury account. There is an option for the republic budget to borrow money from other levels of the state and then to return it,” explains Arsic.
He adds that the money does not have to be borrowed only by issuing bonds, but the state can also take a loan from banks, from the EU, the IMF…
The Fiscal Council warns of the danger of a renewed increase in public debt and thus the cost of repaying interest, which are unproductive costs.
If the economy recovers somewhat faster, the public debt could be kept at 60 percent of GDP, but if economic activity is interrupted again, the debt could jump to 65 percent of GDP.
And in this global time of crisis, the cost of borrowing is increasing, as shown by the April issue of Eurobonds with a yield of 3.375 percent, almost three times more than what was requested six months earlier.
In addition to this, the state issued 2.1 billion euros of bonds on the domestic market by the end of June, and in July it increased by another 100 million euros.
So, since all measures to help the economy are financed from the budget deficit, we will have to borrow for them sooner or later.
Fortunately, the state did not spend five billion euros in the first aid package, as the Minister of Finance repeatedly claims, but about 2.5 billion euros.
In addition, a good part of that, like tax and contribution deferrals, is more loans that will be collected next year.
Also, the question is whether all that could be called help, because without those exemptions, many would be left without a job, and the state without those same taxes and contributions, but permanently.
However, there was another package of measures, although in the last two or three weeks, since the money was gone and the jar was empty, a new package worth around 530 million euros was reached through calling out for communists those who ask for help.
Although some economic sectors, and the loudest were hoteliers, transporters and caterers, sought sectoral measures aimed at the most affected, and even with the announcement of the Minister of Finance that they would be “sniper-precise”, we still ended up with money for everything.
“From the fact that there will be no stimulus, we came to this through sniper-precise measures, and it is interesting that each of these options was declared the best possible at that moment.” It is possible to wait for that research of the economy and that this package of measures is only bridging until then, and that there will be a third package,” said Arsic, adding that Minister of Finance Mali and President of PKS Cadez talked about large-scale research of the economy and focused measures day, two before the speech of the President of Serbia, Aleksandar Vucic, with this broad program.
“Maybe the problem is that the research and analysis would take another two months, and the measures had to be taken out now,” says Arsic, BiF reports.
