As of July this year, Serbia’s national debt has risen to over 38 billion euros. To further increase this amount, the government plans to secure an additional 300 million euros through three new loans. This brings Serbia’s public debt to 50% of its Gross Domestic Product (GDP), placing the country in the moderate debt category according to experts.
Despite what might be seen as positive economic activity, there are growing concerns over the government’s heavy spending and seemingly endless borrowing. The next session of the Serbian Parliament is expected to address these new loans, which are anticipated to be approved by the ruling majority, adding an extra 300 million euros to the national debt.
200 million euros for collaboration with Italy
The first proposed loan involves 200 million euros from Deutsche Bank and Societe Generale, with each bank providing 100 million euros. This funding will be allocated for “general budgetary and operational needs,” as stated in the proposed legislation. It is related to a credit agreement with SACE, an Italian financial institution for export credit insurance, signed at the end of August.
The memorandum of understanding, signed in Rome on March 21, 2023, between the Serbian government and SACE, aims to enhance economic and trade relations between Italy and Serbia. The agreement focuses on sharing information about new business opportunities, supporting Italian exports to Serbia, organizing business and educational initiatives, and integrating Italian companies into Serbian supply chains.
The interest rate for this loan will be variable, based on financial market conditions. Specifically, the six-month Euribor rate, currently at 3.271%, will be increased by a margin of 1.65%. The loan will be repaid over nine years in 18 equal semi-annual installments.
70 million euros for disease prevention
The government also plans to take out a 70.7 million euro loan from the International Bank for Reconstruction and Development (IBRD) for a project focused on the prevention and control of non-communicable diseases. This loan will be used to train primary healthcare staff in disease prevention, address domestic violence, and support mental health. The project will include renovating primary healthcare facilities, running health awareness campaigns, and purchasing new medical equipment.
30 million euros for land administration improvement
Additionally, Serbia is set to borrow 30 million euros from the IBRD to improve land administration. This project includes implementing a mass property valuation system, establishing an infrastructure cadastre, expanding the Risk Register, and supporting the Digital Archive.
Some of these projects are already underway. For instance, the Republic Geodetic Authority’s website now features a database of property prices in Serbia.
