Serbian new FinMin to try to preserve macroeconomic stability

Newly appointed FinMin Sinisa Mali told the public broadcaster RTS last night that his priority will be to maintain macroeconomic stability, pursue responsible fiscal policy and try to reduce public-debt-to-GDP ratio to below 50%. Mali said that his biggest challenge to the post will be to instigate GDP growth, which could be achieved through investments in infrastructure, new plants, etc. The finance minister estimated that there is room to increase public sector wages adding that the topic will be discussed with the IMF in June.

Mali’s predecessor Dusan Vujovic was more cautious about the possibility of a new hike of wages and pensions, as advocated by President Aleksandar Vucic and PM Ana Brnabic, saying that further increase should depend on GDP growth. Vujovic has also warned against giving in to populist pressure, which may reverse the positive reform trend.

The authorities have already announced their intention to increase pensions by abolishing a law on temporary reduction of above-average pensions. We should note that the abolition of the law was suggested by the IMF. Serbia is aiming at a Policy and Co-ordination Instrument, which will provide expert assistance from the IMF to local authorities. The country completed its precautionary EUR1.2bn stand-by arrangement with the Fund on Feb 22 with flying colors, without drawing out funds.

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