UPDATE 3-Serbian finance minister says savings needed to avert default
* Krstic wants to cut deficit to 2 pct of GDP by 2017
* IMF warns 2013 deficit could reach 7.5 percent of GDP
* Krstic pledges to stabilise public debt (Adds IMF statement)
By Aleksandar Vasovic
BELGRADE, Oct 8 (Reuters) - Serbia's new Finance Minister Lazar Krstic intends to cut the government's budget deficit to 2 percent of GDP in the next 3-4 years and save 1.5 billion euros by 2017 to avert default, he said on Tuesday.
The International Monetary Fund, finishing a week-long visit to Serbia, said if the government stuck to the plan it "would be an important step in the right direction and a signal of the authorities' resolve to tackle the economic challenges."
But it warned in a statement that the 2013 deficit - including non-budgeted spending which Serbia accounts for differently - could reach 7.5 percent of gross domestic product (GDP). The government's deficit target is 4.7 percent.
The IMF also revised down its economic growth estimate for Serbia this year to 1.5 percent.
"Inflation is set to decelerate to the National Bank of Serbia's (NBS) target tolerance band soon, but the unemployment rate at around 25 percent remains a major social concern," it said.
Krstic, a 28-year-old Yale graduate who was offered his role in a government reshuffle last month, outlined his plans at an open government session broadcast live on state television - a rare event usually intended to demonstrate a coalition government's unity.
EYES ON IMF LOAN
The Socialist-led government plans to raise value-added tax (VAT) tax on some goods to 10 percent, up from the current 8 percent, end subsidies to unprofitable state companies, cut wages in the public sector and plug revenue holes such as black markets in tobacco and oil derivatives, Krstic said.
"Without these measures we would go bankrupt in two years," Krstic told the nation.
The grey economy - transactions evading tax and other regulations - accounts for an estimated 31 percent of Serbia's total economic output.
Krstic said the government would discuss and start an overhaul of spending including on the pension system and save between 300 and 400 million euros by 2017 by cutting subsidies for loss-making industries.
He said such measures, combined with prospects for a new loan deal with IMF, could help hold down Serbia's borrowing costs.
Serbia lost a previous 1 billion euro ($1.36 billion) deal with the IMF last year over broken spending promises.
Krstic said he would seek extra 2013 revenues of about 0.6 percent of GDP and end unbudgeted support for the public sector in 2014, estimated this year as worth about 1 percent of GDP this year.
He reiterated plans to stabilise Serbia's debt, currently around 60 percent of GDP, at about 75 percent of GDP by 2017 and then to gradually lower it.
He also pledged legislative changes to encourage foreign investment.
"At face value it seems a bit short of measures to curb the deficit in 2013," Timothy Ash, head of emerging market research at Standard Bank.
The Serbian dinar fluctuated only slightly, trading at between 114.5 and 114.13 per euro at around noon (1000 GMT) on Tuesday.
($1 = 0.7368 euros) (Reporting by Aleksandar Vasovic; Writing by Ivana Sekularac; Editing by Christian Lowe/Ruth Pitchford)
- Pope attacks mega-salaries and wealth gap in peace message
- Atheists face death in 13 countries, global discrimination: study
- South Africa admits mistake over 'schizophrenic' Mandela signer |
- Thai military heads agree to meet protest leader at weekend |
- Missouri executes man for killing good Samaritan motorist in 1994