Serbia's parliament adopts 2015 budget, sets deficit at 6pc of GDP

BELGRADE: After 19 hours of debate, Serbia's parliament adopted a 2015 budget early on Thursday, setting the consolidated deficit at 231.9 billion dinars (1.9 billion euros), or around 6 percent of national output.

The budget, drafted in line with a 1-billion-euro loan deal with the International Monetary Fund, sets revenues at 924.4 billion dinars and expenditures at 1.11 billion.

The consolidated deficit that in 2014 reached more than 7 percent of GDP, includes spending of municipalities and some state run firms.

The 2015 budget that sets borrowing at 706.6 billion dinars, envisions financing cuts to hundreds of loss making state-run firms, and job cuts in the bloated public sector.

The general government deficit is seen at 4 percent of gross domestic product and for the first time it will include expenditures for sovereign guarantees for state companies that were previously listed as non-budgeted spending.

During the debate marred by bickering between opposition deputies and the parliamentary majority led by the centre-right Serbian Progressive Party, Finance Minister Dusan Vujovic said that the budget should allow the country to emerge from the crisis.

"This budget demonstrates responsible fiscal policies," he said.

The budget may lead to the reduction of 27,000 jobs in the public sector, of which about one third will come from firing of redundant workforce and may bring 600-650 million euros ($734-795 million) in savings.

Serbia's economy is in recession and is seen contracting 2 percent this year mainly due to devastating floods in May which inflicted damages of over 1.5 billion euros. It is forecast to contract 0.5 percent next year.

As part of the 2015 budget, the government of the European Union candidate country plans to cut most of its financial support to hundreds of loss-making state enterprises which amount to around one billion euros every year in lost tax revenues, banking guarantees and direct subsidies.

In its three-year deal with the IMF, Serbia pledged to save 1.3 billion euros by 2017 to cap its public debt pushing 70 percent of GDP this year.

As the first step, Prime Minister Aleksandar Vucic's government already cut some pensions and public sector salaries from November 1.