Inflation will not exceed last year’s rate

Serbian Minister of Finance Mladjan Dinkic has said that there is no fear that this year’s inflation will exceed the 13.8 percent rate recorded last year.

Explaining the proposed budget revision in the parliament today, Dinkic said that the fact that inflation will be a few percent higher than projected will not disturb the macroeconomic policy.

He said that Serbia needs a budget surplus this year in order to cut the tax on salaries next year and start paying pensions in arrears through bond issues.

Dinkic announced that the parliament will discuss a bill in August envisioning a conversion of unpaid pensions into public debt and the issuing of bonds as of January 15, 2006.

According to him, the state owes approximately a month and a half’s pension checks, or some 20 billion dinars, which will be repaid through bonds over the next three years. He also recalled that 22 months of pensions are owed to retired farmers, which will be paid over the next five years.

The proposal of a revised budget includes a 32 billion dinar surplus, with projected revenues revised upwards 9.3 percent to 433 billion dinars.

The budget outlays will be reduced to 416.6 billion dinars, from the originally planned 401 billion dinars. At the end of the year the state coffers will have a surplus of 32 billion dinars, although the original 2005 budget projected a deficit of 20.5 billion dinars.

Most of the surplus, some 23.5 billion dinars, will be spent on the repayment of public debt, while 5.5 billion dinars will go towards programmes to encourage exports, employment, and home lending.

At the ongoing session, which began on Friday evening, the parliament is also debating changes to the Law on the budget system, appointments and dismissals of judges and prosecutors, changes to financial plans for health and pension insurance, and the election of members to parliamentary committees.