2007 Budget to Post a Surplus

Republic of Serbia’s Minister of Finance Mirko Cvetkovic stated on 5 December that the 2007 budget will definitely result in a surplus, though the projected deficit was expected to amount to 13.7 billion dinars. Addressing a round table on financial services in South-Eastern Europe, Mr. Cvetkovic underscored that in the first 11 months of the year the surplus was close to RSD 37.5 billion and that the Ministry of Finance and the Government invested tremendous efforts to reduce spending compared to the planned expenses. He said that the existing 2008 Budget Bill should not be amended and went on to say that any yielding to strikers’ demands may only take place within the budget allotments, because of the more rationalized use of resources.

Republic
of Serbia’s Minister of Finance Mirko Cvetkovic stated on 5 December that the
2007 budget will definitely result in a surplus, though the projected deficit
was expected to amount to 13.7 billion dinars. Addressing a round table on
financial services in South-Eastern Europe, Mr. Cvetkovic underscored that in
the first 11 months of the year the surplus was close to RSD 37.5 billion and
that the Ministry of Finance and the Government invested tremendous efforts to
reduce spending compared to the planned expenses. He said that the existing 2008
Budget Bill should not be amended and went on to say that any yielding to
strikers’ demands may only take place within the budget allotments, because of the
more rationalized use of resources.

The minister recalled that defining of 2008 budget figures has been accompanied
with a number of strikes by budget users, though majority of economic analysts
are right to agree that the salaries are at the upper limit of what the economy
can sustain. Mr. Cvetkovic explained that the Budget Bill was withdrawn from
the Parliamentary procedure for procedural reasons. The Bill is now back in the
Parliament and will probably be discussed on Monday, 10 December. He also
announced that the state plans to completely withdraw from the banking system
in the medium term, highlighting that four banks in Serbia are currently
majority-owned by the state – Postanska stedionica, Credy banka, Srpska banka
and Pancevacka banka.

Mr. Cvetkovic pointed out that most of the state-owned banks need
recapitalization, primarily Postanska stedionica and Srpska banka, while a
tender may be called for some of them as early as next year. The minister
underlined that the state has no interest to keep a stake in the banks in which
it is the minority shareholder, while the timing for sale of the stakes will depend
on Serbia’s needs for liquid assets. He said that upon expiration of the
one-year agreement with Agrobanka, the state would initiate execution of the
agreement, which entails sale of one-twelfth of the state stake in the bank,
created by recapitalization, each month.

State Secretary of Finance Slobodan Ilic stated that amendments to the Securities
Law are underway, which the Serbian Government should discuss by the end of the
year. Mr. Ilic explained that market players have reached basic agreement about
important amendments to the existing law, which include expanding the definition
of initial public offering and secondary public offering, defining share price
in the new issue of shares by using “book building” procedure and about
financial reporting. According to him, there has been no consent about
amendments concerning unequal position of broker-dealer companies compared to
certified banks, which may also act as brokers, and about brokers’ demands to
open their clients’ accounts with commercial banks.

Mr. Ilic explained there had been a dilemma whether a new law should be
written, because of the significant changes, but it was eventually decided to
amend the old securities law in an expedient procedure. He recalled that one of
the important amendments to the law will be reduction of capital gain tax from
20 to 10 percent, and underscored it was agreed that the capital gains should
be computed once a year and the tax collected only afterwards.

A working group was formed within the Ministry of Finance, which will work on
development of debentures, Mr. Ilic pointed out. He said that the group’s main
task will be to define an action plan about who and when will develop the
market of state, corporate and municipal bonds, which currently do not exist on
Serbia’s financial market. Speaking about further development of the financial
market, Mr. Ilic earmarked law on mandatory third-party insurance and a leasing
law as important activities.