BELGRADE Oct 10 Serbia's economy ministry has
asked the state-run Development Fund to stop lending after
discovering that bad loans constituted almost half of its
portfolio, it said on Thursday.
The ministry said in a statement the credit freeze should
last until it has scrutinised the fund.
Serbia's new Finance Minister Lazar Krstic, a 28-year-old
former McKinsey consultant brought in to reverse years of
economic stagnation and growth in government debt, told the
nation this week it needed to save 1.5 billion euros ($2
billion) by 2017 to avert default.
The ministry said the Development Fund, a state body that
aids financing in domestic investments, has more than 40 percent
of non-performing loans in its 217 billion dinars ($2.57
"More than 40 percent of the loans have matured fully and
have not been paid at all. Furthermore, another 20 percent have
reached partial maturity and have delays in payments...," the
It said the Fund had also issued guarantees worth more than
79 million euros to businesses that are not solvent.
The government plans to cut subsidies to as many as 179
loss-making state firms and trim the public sector, which
employs more than 660,000 of Serbia's 7.3 million people,
through job and wage cuts and a gradual reform of the pension
The International Monetary Fund said this week the
government had taken the right step to tackle its economic
troubles but warned that the 2013 deficit - including
non-budgeted spending which Serbia accounts for differently -
could reach 7.5 percent of gross domestic product (GDP), from
the targeted 4.7 percent.
The IMF also cut Serbia's economic growth forecast for this
year to 1.5 percent.
Belgrade lost a previous 1 billion euro ($1.35 billion) deal
with the lender in 2012 over inflated spending and debt and
hopes to start fresh talks with IMF in the first quarter of
($1 = 0.7395 euros)
(Reporting by Aleksandar Vasovic; Editing by Zoran
Radosavljevic and Ruth Pitchford)