London FT Fuels Speculation About Serbian Bankruptcy

Recent warnings by the London-based Financial Times concerning the economic situation in Serbia have fuelled speculation at home about the country's possible bankruptcy.

The Financial Times warns that Serbia faces troubled economic times, with a large budget deficit, the national currency at an historic low, and growing debts.

Vladimir Gligorov, a researcher at the Vienna Institute for International Economic Studies, agrees that Serbia risks going bankrupt, as it appears increasingly unable to repay its domestic and international loans.

The country has already requested a fresh standby arrangement with the International Monetary Fund.

According to the IMF representative for Serbia, Bogdan Lisovolik, the Fund will visit Belgrade in September to evaluate the economic situation and negotiations about a loan will start later this year.

Aleksandar Stevanovic, another economist, agrees that bankruptcy is a realistic danger if the state continues to spend money and take out more loans irresponsibly.

However, the authorities in Belgrade dismiss speculation about bankruptcy as nonsense, maintaining that Serbia is well able to continue repaying interest on its internal and international debts.

The Finance Ministry say that compared to most Western European countries, Serbia is relatively lightly indebted.

According to the National Bank of Serbia the external debt of the country is worth 54.7 per cent of GDP. The inflation rate is expected to reach 10 per cent by the end of the year.

As a part of its plan to ease the economic crisis, the government plans to change tax policy, increasing taxes on the rich and raising VAT.