WB conditions its loan on starting reforms by summer

BELGRADE - The World Bank (WB) will approve a USD 250 million loan for Serbia’s budget if the restructuring of state-run enterprises begins by the summer of this year, World Bank (WB) Country Manager for Serbia Tony Verheijen has said.

The government has nine months to start with overall reforms to avoid the Greek scenario, and part of these reforms will have to be unpopular measures, such as wage cuts in the public sector, Verheijen said for state-run Radio Television of Serbia late on Wednesday.

Measures to address the situation in the budget and reduce deficit include cuts in the wage bill in the public sector, employee downsizing and resolving the fate of the state enterprises, he added.

Wages in Serbia’s public sector are the second highest among the countries of eastern and central Europe, and in fact, Serbia is the only country where the wages have increased over the past three years, Verheijen said, adding that this is one of the expenditures that the government must control and where it can change things quickly.

Asked which measures he would take first, Verheijen said that he would first suggest that instead of eight, there be only a single basic wage in the public sector and that it be the currently lowest one, and then to go on to reduce the variable wage components, and if even that fails to show results, resort to deeper wage cuts.

Verheijen said that the USD 250 million for the Serbian budget could arrive in the summer, but only if the government proceeds with the restructuring of certain enterprises successfully, warning that if reforms are postponed until the end of this year or beginning of next year, Serbia can face up to a loss of credibility.

This means that the debt costs...