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The announcement that, by the end of the year, Serbia could obtain a favourable loan amounting to some USD 3 billion from the United Arab Emirates has been positively assessed by experts. As for the loan’s purpose, there is general agreement that part of it should be used for the repayment of some previous, more expensive, loans, whereas opinions are divided as to the use of the rest of the loan. The UAE loan, which amounts to some USD 3 billion, could contribute to the overcoming of the difficult economic situation in Serbia. The loan would be granted at a low interest rate and with a 20-30 years’ repayment period. On the basis of the government’s announcements, the loan would be used for the repayment of expensive loans Serbia has taken before in order that high interests costs be reduced and also for the resolving of some burning economic issues. An economy expert, Milojko Arsić, believes that the decision to repay part of the most expensive loans was a good one as the public debt, which has exceeded EUR 19 billion, i.e. some 58% of the gross social product, would be thus reduced. He proposed that the government should consider covering the budget deficit with part of that loan. The budget deficit is one of the major issues encumbering the Serbian economy and is to amount to some EUR 2 billion this year. The state will certainly have to take debts for its coverage and it would be better if the deficit were financed with loans with a 1% interest rate than with those with a 7% or 8% interest rate, which is their current amount at the international market. Arsić believes that part of the loan should be spent on traffic and agricultural infrastructure, while part should be directed to small and medium-sized companies. In his opinion, loan funds should not be invested in the energy and food processing sector as those sectors are able to attract foreign investors on their own.
Although the details of the announced loan are not known yet, analysts expect the terms to be similar to those of the loan granted to Serbia by the Abu Dhabi Development Fund several months ago. That means that, in addition to a long repayment period, a grace period of three to five years could be expected and that the interest rate might not exceed 1%. Such terms are much more favourable than the market ones, which is why the loan should be used rationally. Business people believe that the funds could be used for the financing of good projects, which would contribute to economic recovery. They propose that the money should be directed towards successful companies, which are realizing good financial results, as thus the invested funds will be recovered fasters and it is export-oriented industries that should have advantage. A lower foreign currency inflow on the basis of the export growth would reduce the current account deficit.
The UAE loan is being assessed in Serbia as a straw of salvation. Along with fiscal consolidation and the announcement of stric savings measures, the financial injection of USD three billion of fresh capital was certainly welcome. That would reduce the budget deficit and the public debt and provide the necessary financial support to the slowly-recovering economy as only a few industrial branches are growing while the others are still in recession.
Related News in English
Povezane vesti na srpskom
Συναφείς Ειδήσεις στα Ελληνικά