The European Bank for Reconstruction and Development, which invests in developing nations from Mongolia to Morocco, may take part in Serbian asset sales to help the economy as the country aims to join the European Union.
Participation in sales of stakes in companies including the main phone company and the capital’s airport would depend on the circumstances at the time, EBRD President Suma Chakrabarti said today in written responses to Bloomberg questions as he prepared for a three-day visit to the country.
“In terms of particular projects like Telekom Srbija and Belgrade airport we would be interested in these types of projects under the right circumstances,” Chakrabarti said.
The largest former Yugoslav republic’s new government wants to narrow Europe’s highest fiscal gap of more than 7 percent of gross domestic product, through asset sales, public wage cuts, later retirement for women, a crackdown on the shadow economy and incentives to investors. Deficit cutting would qualify Serbia for a new International Monetary Fund’s loan as Prime Minister Aleksandar Vucic starts entry talks with the 28-member bloc.
The austerity program risks being delayed after the worst flooding since records began to be kept 127 years ago caused billions of euros in damage. The EBRD will help in a “swift response” to aid Serbia, Chakrabarti said.
The London-based development bank also wants to find strategic investors to help support the government.
Vucic’s policy objectives are good, while “further structural reforms will be necessary and a lot will depend on how quickly the government will move with the actual implementation,” Chakrabarti said.
The EBRD will “maintain a high level of engagement” in all areas where its presence can bolster growth and will be encouraging public-private-partnerships for infrastructure, it said.
Serbia, which fully relies on Russia for fuel supplies and the United Arab Emirates for major loans and investments, should diversify its fuel sources and increase energy efficiency to lessen the effect of the Ukraine crisis on Serbia’s economy.
The government should also try attract foreign direct investment “from a wide range of investors” as “there is more competition globally for less available funding” in the aftermath of the financial crisis, Chakrabarti said.
The impact of the Ukrainian crisis “demonstrates the need to modernize and diversify the Serbian economy and widen its trade outreach” and the planned reforms are “leading in exactly the right direction,” he said.
The economy will probably grow 1 percent this year and next, according to the lender’s report released at its annual meeting in Warsaw last week, before stormy weather triggered floods, inundating whole towns and farms and leaving 19 dead in Serbia, 17 in Bosnia and two in Croatia.
“The most pressing challenge for Serbia now is dealing with the aftermath of the floods,” Chakrabarti said. “They will undoubtedly have an adverse impact on the economy of the country and the region as a whole.”
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