If someone asked you, which department has the most money in Serbia, what would you say? Health, education, PIO fund, army, police, infrastructure? Unfortunately, nothing as promised. The largest section in the adopted Budget for 2024 is the Public Debt Administration, which will dispose of 9,3 billion euros. It is necessary for Serbia to borrow as much in the next year, in order to be able to settle the due loans, pay the interest and fill the hole in the budget for the year 2024. The main reason for this enormous amount of borrowing is the fact that Serbia does not repay its debts from earnings or savings, but exclusively from new borrowing, with the additional disadvantage that we are now borrowing at a significantly higher interest rate than was the case with the loans we are repaying.
That is why we have come to a situation where the implementation of the economic policy of this government depends on the Public Debt Administration, which in the previous 11 years was based precisely on excessive borrowing, money printing, ad hoc rating measures, ubiquitous corruption, party staffing, and pandering to foreigners and companies. close to the government.
SCARY FIGURES: In those 11 years, the public debt increased from 15,3 to 35,6 billion euros, and a particular problem is that, despite the claims of the Minister of Finance that "we use loans for multi-year investments, not for consumption", of the new 20 billion euros of debt, only 6 billion euros were invested in infrastructure, while the remaining 14 billion were spent or evaporated. It's like if you took a loan of 20 euros from the bank, then for 6 euros you repaired the roof and replaced the windows on the house, and 14 euros were spent on food and drink. The problem is that you have to pay back the entire debt of 20 euros, with interest.
And that interest on excessive borrowing is already dramatically burdening the Serbian budget, since interest costs have risen to 1,6 billion euros, which is 80 percent more than in 2022 and three times more than in 2012. Interest costs represent as much as 8,5 percent of the republic's budget for 2024, and the amount is perhaps best seen by the fact that today we allocate the same amount of money for interest as for all subsidies (for the economy, agriculture, culture, science, environment, tourism, road and rail traffic...) or 250 million euros more than for all social benefits (for children, mothers, pupils, students, unemployed, displaced, poor, fighters and the disabled).
To make matters worse for Serbia, this is only interest on the current debt balance of 35,6 billion euros, which will be further increased when we "withdraw" the loan funds for projects that are in the implementation phase and whose current value is over 5 billion euros. , and especially the new loans that we have agreed, but we have not yet started to realize them, such as the Belgrade Metro, sewerage in 54 municipalities, the highway Belgrade - Zrenjanin - Novi Sad or Požega - Boljare, which together have a projected the value of an additional 15 billion euros, in which China is leading, to which we will owe 17 billion euros. Instead of financing infrastructure projects from EU grants, which cover up to 85 percent of the project's value, and we choose the contractors through a tender, we borrow from the Chinese and other governments on less favorable terms in order to hire their contractor companies, without a tender and at many times higher prices.
HOW TO INFLATE GDP: Despite the government's constant public denial that our financial stability is threatened, a year ago the state was forced to appeal to the IMF for help and conclude stand-by an arrangement worth 2,4 billion euros of aid, which at that moment saved Serbia from a potential debt crisis, as the IMF stated in its report from December 2022 that "Serbia's access to the international financial market is limited, and the state's borrowing costs have increased" . How serious our financial position is is also shown by the fact that currently, out of 51 European countries, stand-by only three have an arrangement with the IMF: Georgia, Armenia and Serbia, where the first two signed an arrangement for a total of 360 million euros, and Serbia for 2,4 billion.
The fact that Serbia is in an unfavorable financial position can also be seen from the fact that the government is forced to finance more and more long-term infrastructure projects from loans from commercial banks, where the interest rate reaches 9 percent, which is twice as much as the interest on housing loans of citizens, with those same banks.
However, despite the dramatic increase in debt, interest costs and the interest rate itself, the government constantly justifies excessive borrowing with "a low rate of public debt of 51 percent of GDP."
But is the rate of public debt really that high? Is the nominal value of GDP objective, if we know that, according to official statistical data, construction was the main carrier of economic growth in the last five years, and that statistics use contracted project values for their calculations, which are two to three times higher than real ones.
Take for example the recently signed contracts for the construction of the highway Belgrade - Zrenjanin - Novi Sad and the expressway Bački Breg - Nakovo, the value of which in just a few years has increased from one to four billion euros, and it is precisely this, multiply inflated, value of the project enter into the calculation of GDP, and therefore also into the calculation of the public debt rate. Unfortunately, that's not all. When calculating GDP in euros, the government increases real GDP growth with a deflator, i.e. the inflation rate, which it incorporates into the value of GDP in euros, and that is why we have a completely unrealistic situation of GDP in euros in the period from 2022 to 2024 . grows by 40 percent, from 53 billion euros to 75 billion euros, although the cumulative real growth is only 8,5 percent. And again, we calculate the rate of public debt in relation to that inflated and unrealistic GDP value, which therefore means that the rate of public debt is in reality much higher, well above the "Mastrika" 60 percent.
Ultimately, the public debt rate must not be the only indicator of the country's financial position, since economic history warns us that Argentina went bankrupt at the beginning of this century, even though it had a public debt rate of "only" 47,4 percent.
ARTIFICIAL GDP GROWTH BUBBLE: When we look at everything, it is evident that we have a government that is "addicted to borrowing", like a gambler, who first borrows from family, then from godfathers, neighbors, acquaintances, and finally from greengrocers. And he doesn't ask for interest.
And that is a logical consequence of the economic policy in which the government does everything and builds exclusively from debt. Regardless of whether it is helping pensioners, building a new road, storing natural gas, purchasing equipment for hospitals, introducing the Internet to schools, investing in science, reducing pollution or organizing a specialized EXPO exhibition... Look at literally every major government project and you will see it being realized from debt.
And that's why the Public Debt Administration will realistically have the most work in the coming year as well: it will borrow on our behalf from foreign governments, from commercial banks, from institutional investors, and from international financial institutions. They will owe us loans, loans, Eurobonds, bonds, guarantees, and project loans. They will put us in so much debt that we will no longer know to whom and how much we owe.
With unfavorable and excessive borrowing, they will continue to pump the artificial bubble of GDP growth, until one day it bursts, perhaps as a result of the new debt for the EXPO of 12 billion euros.
We must not forget that the government "hooked on debt" is gambling with our fate and the fate of our children, and that the consequences of bursting that artificial debt bubble will be greater if the bubble continues to grow.
That's why we have to "blow it out" in time, before it's too late.¶
