FISCAL COUNCIL: Local authorities in Serbia owe around EUR 1 billion

Towns and local self-governments in Serbia owe around a billion euros and are late in paying due obligations in the amount of EUR 300 million, making up 4% of the GDP, said president of the Fiscal Council, Pavle Petrovic, on May 28. He said that the fiscal problems of towns and local self-governments were jeopardizing the public finances of Serbia and impairing the economic growth.

– If the Government of Serbia does not take the necessary measures, the debts of towns and local communities will sink the state finances – Petrovic said.

The debt, as he said, is as big as that of Elektroprivreda Srbije – a billion euros, or the debt of RSD 1.2 billion that Srbijagas had.

He cited the example of the municipality of Smederevska Palanka, which is currently late with paying obligations amounting to three annual budgets.

– There are no precise data on delays in the payment of obligations due, but, according to the report by the State Audit Institution of Serbia and the budget analysis, the current debt of towns and local self-governments, not counting the debts of local public enterprises, pharmacies and health centers, exceeds EUR 100 million – Petrovic said.

– The structural problem of local self-governments is that great budget funds are spent on subsidies, around EUR 200 million in total, whereas, at the same time, they lack EUR 250 million for investments in local infrastructure, water supply systems, sewerage, waste treatment – Petrovic said.

He added that Belgrade and Novi Sad poured the sewage into the Danube, as they lacked central filters.

The way the City of Belgrade incurs debts in order to increase investments is not, according to him, a good model, as the debt has grown from EUR 60 million in 2007 to the current EUR 410 million.

The City of Novi Sad, he says, has more stable finances than Belgrade, but has no money for investments. He added that it should be kept in mind that Novi Sad was getting another billion dinars, in line with the Law on Local Self-Government Financing.

– A danger to the city budget might lie in the debts of pharmacies owned by the local self-government of around RSD 400 million and the accumulated loss of the Sports and Business Center Vojvodina of RSD 500 million – Petrovic said.

According to him, late last year, the City of Nis was late with repaying obligations of RSD 3 billion, more than a third of its budget.

In the past three years, as Petrovic said, the City of Nis has been receiving extraordinary aid from the state budget in the total amount of around half a billion dinars and taking out a liquidity loan in order to pay for the immediate liabilities.

– The hardest situation is in the City of Kragujevac, as it owed four billion dinars at the end of 2015, nearly equaling the annual budget. Local public enterprises owe two billion dinars, and the city's heating plant Energetika owes to everybody and has claims towards everybody. The company owes EPS and Srbijagas 12 billion dinars – Petrovic said.

When asked whether he expected the new prime minister of Serbia to solve those problems, Petrovic said that the prime minister needed to do so.

He adds that it was the duty of the ministers of economy, finance and local self-government to be aware of the problems of the past years.

Fiskalni savet Republike Srbije

Elektroprivreda Srbije ad Beograd

JP Srbijagas Novi Sad

JKP GSP Beograd

Energetika d.o.o. Kragujevac

Pavle Petrovic

debts of towns

debts of municipalities

debts of local self governments

public finances of Serbia

EPS

debts of Elektroprivreda Srbije

debts of EPS

Srbijagas debts

investments in local infrastructure

State Audit Institution