‘Serbia keeps taking new loans to pay off old ones’

by Redacția

“The new loan of one billion dollars that Serbia has taken from the United Arab Emirates (UAE) will not make it the most indebted country, but it should be borne in mind that Serbia has not repaid any loans so far and the country continues the practice by taking a new loan to cover the old ones,” said FEFA Faculty professor, Goran Radosavljević.

Radosavljević told the Beta news agency that the concept of indebtedness can be measured by several indicators, and one of them is the country’s ability to repay its loans.

“In the past ten years, Serbia’s debt has increased by about 15 billion euros because the country has borrowed extensively,” he said and added: “Old loans are mostly refinanced and one loan is taken out to repay another, and the fact remains that interest rates are rising, maturity is getting shorter and it will be increasingly difficult to get new loans,” Radosavljević said.

The President of Serbia, Aleksandar Vučić, said that during his visit to the United Arab Emirates two days ago, an agreement was signed between the countries, according to which Serbia will receive a loan of one billion dollars at a favourable interest rate of three per cent, half the rate given to others, ”which will ensure the country’s solvency”.

Professor Radosavljević added that, ten days ago, a bond maturing in early 2028 was issued at an interest rate of 6.8 per cent, but that only 30 per cent of those bonds had been sold and that not enough money had been ‘raised’.

He went on to say that the 3 per cent interest rate on the UAE loan, in a situation where the dollar is the strongest in 20 years, is more favourable than the market rate, if there are no other conditions. The second problem is that, as he said, $1 billion is a drop in the ocean of money needed to pay off the budget deficit and repay overdue loans, and next year. Serbia will have to repay between 4 and 5 billion euros.

Radosavljević then stated that the third problem is that the projections for gross domestic product (GDP) growth are such that economic growth is lower than expected. The consequence of this, as he pointed out, could be that the share of public debt in GDP jumps in the short term and, if the deficit grows, new loans at higher interest rates will follow.

“A potential new agreement with the International Monetary Fund (IMF) would show whether the country is going in the right direction, which would be a good sign for investors, but what is being done now is far from making public finances stable,” Professor Radosavljević concluded.

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