Draft budget 2005 – realistic and growth-oriented

Serbian Minister of Finance Mladjan Dinkic said today that the economic plan proposed by the government within the terms the draft budget is harsh, but realistic and that it would ensure growth in 2005.

Presenting the 2005 draft budget at the Serbian parliament, Dinkic said that reduction in spending to 45.5 percent of GDP will ease the tax burden on citizens and the economy and pave the way for new investment and new jobs.

He said that a budget surplus can be expected by mid-2005, allowing for further tax cuts for businesses. Dinkic added that a set of changes to tax laws have already been submitted to the parliament and that they should come into force by January 1.

The government-proposed bill envisages 396.1 billion dinars in revenues and 416.6 billion dinars for spending, with a budget deficit of 20.5 billion dinars, or 1.4 percent of GDP.

Dinkic said that the projected budget revenues for fiscal 2005 are based on an estimate that the economy will grow 4-5 percent and on a targeted inflation rate of 9.1 percent. He said eight billion dinars from privatisation, around 5.7 billion dinars from international loans and donations, and borrowing in the local financial market of 6.8 billion dinars will suffice to cover the projected budget gap.

Debt servicing will cost around 46.3 billion dinars, 13.6 billion dinars more than in 2004, said Dinkic, explaining that 18.6 billion dinars will be used for repaying sovereign debt and 27.4 billion dinars for internal debts.

Dinkic also said that the government expects a total of 25 billion dinars in privatisation receipts, five times more than in 2004. He added that 20 billion dinars from the budget will be allocated to the farming sector, of which 11 billion dinars is in subsidies.

He said he hopes that the budget bill will be passed within days, recalling that the deadline for its adoption is December 31.