The Serbian government recently tried to agree on a rescheduling of its obligations to Chinese creditors, but the partners from Beijing were not interested in any concessions, the Demostat portal announced today.
As stated, after the negative response from Beijing, Serbian President Aleksandar Vučić asked Luxembourg Prime Minister Xavier Bethel for help on the sidelines of the European summit in Moldova at the beginning of June.
The Government of Serbia recently announced an extensive program of public spending – from an increase in salaries in the public sector and pensions to the distribution of 10,000 dinars for children up to the age of 16.
The cost of the new package will be, as calculated by the Fiscal Council, 550 million euros, and although the Minister of Finance Siniša Mali assures that there is money for these measures, events behind closed doors indicate that the state is rapidly trying to clear space in other places in order to free up funds. For the measures presented by President Vučić, according to Demostat.
According to the data of the Public Debt Administration, Serbia currently has obligations of a total of 2.26 billion euros to the Export Import Bank of China, the institution through which almost all loans to Serbia from this country go.
In addition, there is also a debt of 23.78 million euros to the Hungarian branch of Bank of China for the construction of sewage infrastructure in 11 cities throughout Serbia.
For all these loans, Serbia will have to provide 128 million euros this year, just for repayment of the principal, as shown by Demostat’s calculation based on data from the republic’s budget for 2023.
“Not only should we add to the principal the cost of interest, which we usually pay at a rate of two to three percent on Chinese loans, but from next year, Serbia is waiting for the start of repayment of loans worth 706 million euros, for which until now the grace period lasted )”, the portal writes.
This means that starting next year, budget expenditures for Chinese loans will increase drastically.
But that’s not all either, because 2.2 billion euros, which is the current state of Serbian debt to the Export Import Bank of China, is significantly less than the total contracted volume of loans with this bank.
Namely, Serbia has signed loan agreements with the Chinese in the total amount of at least 4.3 billion euros, of which 2.2 is just the current debt.
The difference goes to the part of the loan that has already been repaid, as well as to the part that has not yet been withdrawn.
“Exactly that undrawn part will be a big burden for us in the coming years,” said Demostat.
For example, the loan for the high-speed railway from Novi Sad to the Hungarian border alone is worth almost one billion dollars, while the current debt is 369 million. As the railway is being built, Serbia will withdraw the rest of the loan.
In the last seven months alone (from September to March), Serbia has withdrawn more than 100 million euros, and has not yet repaid a single installment. Repayment starts next year and will last until 2039.
As Demostat learns, after the Chinese refused to postpone part of Serbian obligations, the Government turned to partners from the European Union in an attempt to secure more favorable refinancing.
One of the interlocutors on that topic was the Prime Minister of Luxembourg Xavier Bethel, with whom Aleksandar Vučić met on the sidelines of the summit of the European Political Community in Moldova at the beginning of this month.
The President of Serbia published a photo from that event in which he is in the company of Bethel and the President of Ukraine, Volodymyr Zelenskiy, but the topic of Chinese loans was not mentioned in any of the announcements.
For now, it is not known whether this initiative was successful.
As for cooperation with China, it is not in question for now, although it remains unknown whether European partners will set Serbia’s distance from Chinese influence as a possible condition for a positive response to Belgrade’s requests, Demostat said.
It Is known that the EU has long been dissatisfied with China’s expansion in the Balkans and that Serbia and Montenegro, for example, have often been criticized for taking Chinese loans for infrastructure or accepting large Chinese investments.
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