BELGRADE, Aug 21 (Reuters) - Serbia’s 2014 budget deficit should not overshoot 4 percent of gross domestic product (GDP), down from the revised 4.7 percent target for this year, said Lazar Krstic, the country’s finance minister designate.
“What is acceptable for the International Monetary Fund and the international community is the deficit of three percent, four percent at most,” Krstic, a 29-year old Yale-educated economist, said an interview with Belgrade’s NIN weekly, which will be published on Friday.
“It is difficult, but this will be our goal for 2014,” he told the weekly.
Krstic, whose appointment should be confirmed by parliament on Monday, said Serbia would turn to the World Bank and the IMF to stabilise its finances. The IMF last year froze a previous 1 billion euro ($1.34 billion) standby loan deal with Serbia.
Both the IMF and the country’s fiscal advisory body have warned the government that it risks missing the budget gap target of 4.7 percent of national output this year because of shrinking revenues and high spending.
Serbia’s public debt is also seen rising to about 65 percent of GDP this year, higher than the IMF recommends for similar emerging economies.
Last month, outgoing Finance Minister Mladjan Dinkic unnerved investors by saying a new arrangement with the IMF was unrealistic this year, while Krstic indicated a new deal with the international lender would be welcome.
“The arrangement with the IMF would be a positive signal ... that Serbia is pursuing a responsible economic policy,” Krstic said.
On Wednesday, the World Bank country manager for Serbia, Tony Verheijen, said the bank was ready to provide up to $250 million in budget support this year and the same in 2014.
He said the lender could aid Serbia if the government adopts the 2014 budget in November, reforms public companies, ends subsidies to 179 loss-making state firms, and makes additional savings of about 0.5 percent of GDP.
“It is true there’s an option that the World Bank may also help financing Serbia’s budget, and the condition is a timely adoption of a responsible 2014 budget,” Krstic said.
Serbia has tapped international markets three times since last September, raising $3.25 billion, the equivalent of around 8 percent of GDP, and plans another $1 billion Eurobond in September.
Krstic said the country had no other option but to roll over some of its debt.
“We simply have to refinance a part of public debt,” Krstic said, adding without elaborating that “some positive surprises are possible.”
Serbia, which emerged from recession in the first quarter, will need to borrow around 5 billion euros ($6.68 billion) to cover the budget gap in 2014.($1 = 0.7448 euros) (Reporting by Aleksandar Vasovic; editing by Ron Askew)