BELGRADE: Serbia's 2017 budget is credible and should improve the country's finances but high state debt remains a key risk for the economy, the Serbian fiscal council said on Friday.
Belgrade adopted a draft budget last week that would reduce its deficit to 1.7 percent of economic output, but the independent advisory body said state debt of around 74 percent of gross domestic was "dangerous".
"Unsucessful state firms are a tremendous budget expenditure and risk," it said in a statement. The Serbian government is due to pay more than 700 million euros next year on loans it has guaranteed for state-owned and formerly state-owned companies.
Among the conditions of a 1.2 billion euro ($1.27 billion) loan from the International Monetary Fund, Serbia must sell or shut down remaining loss-making state-owned firms that have enjoyed state protection, including the RTB Bor copper mine and several petrochemical plants.
"There are other structural problems of public finances reflected in too-high current public spending and low public investments, frequent unplanned expenditures and the untenable position of a number of municipalities," the council said.
Pavle Petrovic, the council's head, said that Serbia must come to an agreement about overdue payments to the Srbijagas state gas utility and the Elektroprivreda power utility estimated to total up to 20 billion dinars ($172 million) in 2016.
"This would represent the biggest danger for the (2017) budget," he said. The council also warned that upcoming payments for state-guaranteed loans issued between 2010 and 2014 for state railway company Zeleznice Srbije, Galenika pharmaceuticals and the Zelezara Smederevo steel mill - now owned by China's Hesteel - would amount to 300 million euros next year.
"The state will also have to pay another 100 million euros for the Petrohemija (petrochemical plant), 200 million euros for the Srbijagas and for (now-defunct air carrier) JAT Airways another 140 million euros," Petrovic said.
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