Will borrowing in Serbia be more expensive next year?

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After the outbreak of the energy crisis, the Minister of Finance sent a message that the state treasury is stable.
At the extraordinary session of the government a few days ago, which was held due to the energy crisis, Sinisa Mali, the Minister of Finance, sent a reassuring message that Serbia will have two billion euros in its account at the end of the year.
Mali said that “today Serbia has 2.3 billion euros in its account”, which means more than those two billion euros. We are completely liquid, we do not depend on no one, so if we need to react, we will react, we are ready, Mali emphasized, answering the question of the President of Serbia, Aleksandar Vučić, about the situation in public finances. He added that neither in January nor in February, the state will have to enter the capital market.
“Given the higher revenues and lower expenditures that we had, our public debt will be one percentage point lower than expected, it will amount to 57.2 percent of GDP,” the minister said.
Since the recent budget revision envisages that the deficit in public finances is 4.9 percent of gross domestic product (GDP), it is clear that Serbia has not turned into a plus, ie a surplus, on this issue, but that it is about funds on the state account.
Milojko Arsić, professor at the Faculty of Economics in Belgrade, explains that since we have a deficit this year, those funds in the account are not accumulated income from taxes, ie savings, but from loans, because Serbia borrowed more than 2.5 billion euros this year. In his opinion, it is probably a consolidated treasury account and not all of these funds are intended for payment. There are own funds of state institutions, hospitals, courts, local communities, faculties. This is common, the state always has several hundred million euros in reserve for emergency situations. Everyone can spend their own money, although the budget can sometimes borrow other people’s money temporarily, but it must also repay. It is good that the money exists, but it will be used to cover the deficit next year.
“It is now quite clear that the deficit will be smaller than planned in the rebalance. Between 3.5 and four percent of GDP, which is still a high deficit. Some expenditures appear to be weaker than planned, and revenues are slightly better. Since revenues are planned in nominal terms, when inflation is higher, they are also higher. It is good that we borrowed at low interest rates this year, because maybe they will be higher next year,” says Arsić.
The US Federal Reserve (FED) has just announced that it will aggressively reduce monthly bond purchases and start raising the reference interest rate from the spring of 2022, in response to rising inflation. The US Federal Reserve cut 15 billion dollars in monthly purchases in November, doubled that reduction in December, and will cut cuts further from early next year to end a stimulus program introduced in 2020 to support the economy in coping with the corona crisis.
When the so-called quantitative easing program is completed, in late winter or early spring, the FED predicts that it will start raising interest rates, which it left unchanged at this week’s meeting. Projections show that FED officials expect as many as three rate increases in 2022.
“It is much more important for us whether the European Central Bank will increase interest rates, because its influence on us is greater. In Europe, it is slower to decide when interest rates are falling and when they are rising. After the decision of the FED, it may be that the ECB will, with a certain delay, do something similar. Then the interest rates on our borrowing abroad will jump,” states Arsić.
According to the latest published data from the Ministry of Finance, the state treasury is in the red. In the period January-October, the republic budget deficit amounted to 828.8 million euros. Revenues were 10.09 million euros and expenditures 10.9 million euros, Politika reports.