Heritage of the reformatory Minister of Finance

The old building of Serbian Ministry of Finance, Belgrade, Serbia (jaime.silva, CC BY-NC-ND)

On May 2018, Dušan Vujović, the Serbian Minister of Finance submitted his resignation. Siniša Mali, the mayor of Belgrade, replaced him.

For several month there have been speculations on the reconstruction of Serbian Government headed by the Prime Minister Ms. Ana Brnabić, and Dušan Vujović’s resignation has been the subject of speculation even longer. Namely, even though his resignation letter does say that he made such a decision for personal reasons only, some people in media and politics believe that there were strong professional reasons, too.

The Serbian government issued a brief statement which said that “the Prime Minister Ana Brnabic is grateful to Dušan Vujović for his cooperation, his commitment to the goals of the Government, and the results achieved in his department.” After his resignation, Vujović went to Jordan to the annual meeting of the European Bank for Reconstruction and Development (EBRD) as a former minister.

Soon afterward, media speculations about who might succeed him followed. Siniša Mali, the mayor of Belgrade, was thought to be the most probable candidate. This turned out to be a solid prediction because by the end of May, the Assembly discussed choosing Siniša Mali as a replacement.

It was back in the middle of last year that Vujović made critical remarks about the work of the government. “Serbia did not save up, but rather failed in realizing the plan,” he said when asked about the failure to manage RSD7bn of funds allocated for capital investments. Since the Serbian state finances have produced a surplus in the ruling circles, a lively debate has begun on how to spend these funds. It has been mentioned that salaries in the public sector and pensions might be increased (i.e., the pensions might be the same as before the earlier cuts).

Vujović emphasized his disagreement with the sudden increase in public spending on several occasions. During Kopaonik business forum, the largest gathering of business and political elites in Serbia, Vujović stressed that “he will not give consent to make salary and pension growth faster than the growth of the economy.” According to N1 television, on that occasion, he was not willing to answer the question of whether he would remain in the government should the increase be still higher than the economy growth rate.

According to Anica Telesković, a journalist of “Politika,” he also expressed his dissatisfaction with the government’s willingness to increase the public spending, when he had a lecture at the Serbian Academy of Sciences and Arts that was not open to the public. “Now, everyone, rightly, expects to share the result. But if we do so now, it won’t be long before we go back to where we started a little bit more than three years ago,” Vujović warned.

According to Vujović, in the last couple of decades, Serbia has been in the same situation in which it is now already four times – achieving short-term monetary stability. However, in order to turn this trend into a long-term sustainable and inclusive economic growth, it is necessary to carry out institutional and structural reforms. “What we have is just seed material, and we want enough wheat to make bread out of it and then eat it,” said Vujović.

Vujović began his career as an economist at the Institute of International Politics and Economics in Belgrade, and since 1975, he was an assistant at the Faculty of Economics in Belgrade. Since 1979, he has been a part of the World Bank Young Professionals Program. He continued to climb the career ladder at the World Bank between 1992 and his retirement in 2011. Even after his retirement, he continued to provide consulting services for this international institution.

When it comes to Serbian political and financial circles, Vujović was considered to be one of the most probable candidates for the position of the governor of the National Bank of Serbia in 2010, since Radovan Jelašić submitted his resignation to this job. However, Dejan Šoškić was elected instead.

Since April, 2014, Vujović was the minister, first he became the Minister of Economy, though he remained one only for a few months. In August, 2014 he was appointed as the Minister of Finance, after Lazar Krstić resigned. Krstić insisted on a strict program of monetary reforms that the government at the time found politically unacceptable – according to his statements, the program was to include “the reduction of pensions by at least 20 per cent, the reduction of public sector salaries by at least 15 per cent, the dismissal of 160,000 people from the public sectors, and 30 per cent increase in electricity prices.”

The reforms that Vujović implemented as the Minister of Finance were more moderate, but, again, they, too, included unpopular measures for reducing public expenditures.

Vujović’s first successful move was the achievement of the precautionary arrangement between Serbia and the International Monetary Fund (IMF) (read more). According to Anka Milivojević, a journalist at NIN magazine, Serbia’s position within IMF was rather poor. Namely, in 2012, the arrangement between the Serbian government and the IMF was broken due to government’s decision to increase of public spending prior to the elections (the original plan was to have a deficit of RSD115bn throughout the year, but by the end of April 2012, it already amounted to RSD83bn). “That’s why our reputation in this financial institution was bad – we were known for making promises and then not keeping them,” wrote Ms Milivojević. In November, 2014, Vujović announced that the agreement with the IMF had been reached.(read more on the latest arrangement between Serbia and IMF)  

Vujović took over Serbian state finances when the prospects were rather dim. According to him, Serbia was three months away from bankruptcy. At the end of 2014, Serbia had a large deficit of 6.6 per cent of GDP, while at the end of last year, there was a surplus of 1.2 per cent of GDP. There was also a decline in the public debt in GDP: from 70.4 per cent (at the end of 2014) to 61.6 per cent (at the end of 2017). The downward trend has continued in 2018, as well.

In his article published in NIN magazine, Vujović pointed out that “compared to the previous four fiscal consolidation programs, the fifth program had a positive impact on two deficits (the internal – fiscal, and external – current balance of payments), it changed the dynamics of GDP growth, reduced unemployment to a great extent, increased the foreign direct investments, and improved the business environment and the position of Serbia in the international financial market.”

Vujović stated that the turning point in the GDP growth occurred in the Q4’14. Before 2014, Serbia suffered severe consequences of the international financial crisis, together with the mistakes in its own economic policy. Economic policy makers of 2009 seem to have overlooked the fact that the induced increase in salaries and pensions would lead to an increase in import, and thus to a further deterioration in the foreign trade balance. As a result, Serbia was burdened with huge debts and was in a highly unfavorable financial situation between 2009 and 2012. “Basically, they did good things, but the Serbian economic system could not endure that,” Vujović said about the policy of his predecessors in an earlier statement. There was no significant change in the economic policy between 2012 and 2014, even though the ruling party did change. According to Vujović, it was only after the floods that hit Serbia in 2014 that people began to see things more clearly.

During 2015, Vujović drew up a state budget that had a pivotal role in deficit reduction and a subsequent public debt reversal. There were no hidden expenditures in this budget draft and the state guarantees were not issued for the ongoing consumption of public enterprises, but only for investments.

He “rebalanced the rebalancing” of the budget, which was somewhat ridiculed by the public. However, this budget that he called “historic” might turn out to be the right solution if his successor to the position of the Minister of Finance does not take a sharp turn.

Milica Milojević is an economist and analyst, a part-time economic journalist with corporate, banking, and consulting experience. She has written papers on monetary and political economics, and economic history of Serbia and the Balkans.

Share this post

TOP