We are taking the burden of the crisis on ourselves, which I consider the basic function of the state in times like this, because the most important thing is to preserve the standard of living of the citizens of Serbia. The state acted very responsibly when, in the conditions of rising fuel prices, it gave up part of the income from excise taxes, thus reducing its revenues in the budget, but, on the other hand, ensuring that the price of fuel does not rise as much as it could without this move. For example, if you look at the revenues in the rebalancing of the budget, you will see that they were higher by a total of 192 billion dinars, and that there is growth everywhere except for excise taxes, but in this way we ensured lower fuel prices. We will continue to adhere to this responsible policy, we closely monitor the situation on the market and make decisions based on market trends. We were responsible and the citizens saw that we react quickly, efficiently and in a timely manner, Sinisa Mali says in an interview for “Politika”.
Was it difficult to make the budget for 2023 in a situation of global instability when inflation is quite certain and economic growth is uncertain?
It is true that the situation in the world today is full of uncertainty, in every sense, but the citizens should know that we are fighting day by day, and that we have managed to preserve the hard-won stability. In this way, we have room for higher salaries and pensions, help for young people, and all this in order to maintain the quality of life of citizens. The budget for the next year will be developed, balanced, socially oriented, with precautionary elements for crisis response. This means that we will do our best to ensure further growth, but also the protection of those who can feel the effects of the crisis spilling over our country the most. We continue with public investments, and we also want foreign direct investments to grow further and to exceed this year’s 3.4 billion euro inflow for the first 10 months next year. All this with the already mentioned support to citizens. A very important segment both in the rebalance and in the budget for the next year is the energy sector. It is important that we are stable there, that we have electricity, gas, all the necessary energy sources, since this sector is currently the source of all world instability. It will not be easy, but I am confident that we will succeed in this.
Substantial funds are needed to finance the deficit and pay the debts due in 2023. You have already started collecting money for these purposes. A loan from the Emirates, the IMF, the World Bank has been announced… Will all that be enough?
All obligations are planned, responded to in a timely manner and the pace of collection is designed in accordance with all plans. Next year, about 4.6 billion euros of debt, direct obligations, will be due, of which about 67 percent is internal debt, while the remaining part refers to loan obligations, and 10 percent to loans to international institutions such as the World Bank, the European Investment Bank, and so on. , 16 percent bilateral contracts… The Ministry of Finance is planning and thinking about the strategy and ways of securing the necessary funds for their repayment in a timely manner, so we already started negotiations with various institutions in the middle of the year in order to ensure sufficient support, and we plan to repay part of the debt by issuing bonds on the domestic market.Interest rates on government borrowing have skyrocketed. That goes for us too. How much of a challenge are the current high interest rates for fiscal policy?
Serbia does not have high interest rates on debt, I expect that the share of interest in GDP for the next few years will remain below or around two percent, which is a good position for us to avoid challenges. This ratio has been halved in the last few years. At the end of 2022, it will amount to about 1.6 percent, in 2015 it was as much as 2.9 percent of GDP. The development of the capital market of government bonds, the growth of the country’s credit rating, the reduction of the risk premium, the low inflation rate and the reduction of the reference interest rate of the NBS have lowered the cost of borrowing for us in recent years and set us on the right path.
Head of the IMF mission, Jan Case Martein, after the recent visit when the new standby arrangement was agreed, stated that the authorities intend to use the financial resources that will be available during the first part of the arrangement, and to treat the remaining access as a precaution. Can you clarify that?
The International Monetary Fund (IMF) means security for our country, and the arrangement with that financial institution gives credibility to the reforms we are implementing and to our economic policy. The importance of the arrangement is best illustrated by the fact that, after the news of the agreement reached with the IMF was announced, the market reacted positively, and the bonds traded on the international market recorded a drop in yield by one percentage point. We will withdraw funds from the IMF as needed, to repay old debts and to maintain financial stability.
Is there any hope that the losses of “Elektroprivreda Srbije” and “Srbijagas” will be smaller next year and that they will burden the budget less? They increased the deficit in the state treasury, they are one of the main reasons for the rebalancing, and the IMF insists that they be reformed. The IMF stated after the visit that the new arrangement should support the government’s efforts in structural reforms, with an emphasis on the energy sector?
The losses of these companies are mostly due to the low price of electricity and gas for the population and the economy. The price of electricity on the market jumped ten times from last September to this, and we, on the other hand, had only one low price increase. The goal is to stabilize these companies financially and reduce the burden on the budget in the coming year. Our task is to ensure, first of all, stability in the supply of all energy sources, which means that at no time is the supply of energy sources to the citizens threatened, so that they have electricity and heating. That is why we negotiated the support of the IMF, and we certainly discussed and made plans for the structural changes of these companies that will be implemented as part of the overall reforms in Serbia.
Will the state nationalize NIS?
It is very important for us that the NIS functions normally and that we provide citizens and the economy with sufficient amounts of energy. So that there is fuel at the pumps, and that, on the other hand, our companies also have enough fuel oil, heating oil and everything that NIS provides. In the conditions of the world energy crisis, it is very important to have a stable and strong company that gives you complete security. I have regular contacts with the representatives of NIS and I believe that through constructive cooperation and dialogue we will continue to make decisions that are primarily in the interest of the citizens of Serbia.
Many countries, including those in our neighborhood, are introducing a tax on extra profits, not only for oil companies. Are we also thinking about it?
I am carefully following what other countries are doing and the announcements on this topic that have come from Croatia, Austria, and Hungary. At the moment, Serbia is not thinking about introducing extra profits. We are completely stable, we have enough money in the budget and I don’t want to cause any shocks or negative reactions with sudden and unexpected decisions. We are fighting for a predictable economic environment and we make every decision in cooperation with the economy and businessmen. It is no coincidence that Serbia is the leader in the region in attracting foreign direct investments. We have attracted more than 250 new factories in the last ten years, our unemployment is at a historically low level. We will continue with reforms because it is also important for companies operating in Serbia. E-fiscalization, e-invoices, the fight against the gray economy,
You often say that last year in September we took out green bonds with only one percent interest. What was that good money used for? To which green projects? Or did it go to general budget spending?
The funds are intended for projects such as “Clean Serbia”, the construction of the Belgrade metro, investments in railway infrastructure and other projects from the so-called green agenda. The green Eurobond was issued in the amount of one billion euros with a maturity of seven years and a coupon rate of one percent, the lowest so far achieved on the international market. The Republic of Serbia is among the rare European countries that have done this. Projects eligible for financing from green bonds are defined by the framework document for the issuance of green bonds, which is aligned with the standards of the International Capital Market Association and is designed in such a way as to ensure certainty for investors that funds obtained through the issuance of green bonds will be used to finance green projects and from the field of renewable energy,
How will freelancers pay taxes from the New Year?
I am glad that after a long time we managed to reach an agreement with the freelancers, so that they are also satisfied, and that the state also found an acceptable way to tax them. Given that they generate different incomes, and that for many of them this is the only income, it was suggested that they choose between two ways of paying taxes and contributions. In the first option, the taxable income is the realized income in the quarter in the gross amount and is reduced by the normalized costs in the amount of 96,000 dinars, and the income tax is paid at the rate of 20 on the obtained basis, while the contributions for pension and disability insurance are 24 percent, starting next year.
Contributions for mandatory health insurance amount to 10.3 percent, with the fact that the basis of contributions for health insurance for the quarter cannot be lower than three times the amount of 15 percent of the average monthly salary in Serbia. According to the second option, taxable income is determined by deducting the realized income in the gross amount in the quarter by normalized expenses in the amount of 57,900 dinars increased by 34 percent of the gross inflow realized in the quarter. The taxable income determined in this way is subject to the personal income tax at the rate of 10 percent. Contributions for mandatory social insurance are paid at the same rates as in the first option, and taxable income is the basis for calculating the amount of contributions, with the fact that in this option we have a prescribed quarterly minimum basis for both contributions, namely contributions for pension and disability insurance – at least three times the amount of the lowest monthly base contribution and contribution for mandatory health insurance – at least three times the amount of 15 percent of the average monthly salary in the Republic of Serbia.
What effects did the cross-assessment of earnings and assets have?
It is a serious business, which we deal with with full attention, and it is extremely important that this type of screening is carried out to the end. At this moment, verification procedures are underway for 13,000 natural persons who have been assessed as deserving of special attention from the Tax Administration. This number was arrived at after cross-checking data on the increase in assets and reported income for more than 1.2 million citizens. With them, the difference amounted to more than 150,000 euros, and this will be investigated by the Department for determining the origin of property and special tax of the Tax Administration of the Republic of Serbia. Their reported incomes do not even remotely correspond to the stated increase in property value, and this raises suspicion. Corruption has been a cancer of Serbia’s wounds for decades, it must be eradicated because without this step, all the reform efforts are in vain. The fight against corruption must be determined, Politika writes.
