EU proposes Belgrade amends Budget System Law and demands full independence of NBS

The European Commission, in its latest annual report, assesses that Serbia has made some progress in aligning its economic and monetary policies with EU rules, but that significant changes in law and practice are still needed for the full independence of the National Bank of Serbia (NBS) and more transparent management of public finances.

According to EU rules, central banks must be fully independent, and their regulations prohibit direct financing of the public sector. At the same time, member states are required to harmonize their economic policies and be subject to fiscal, economic and financial supervision, which is also expected of EU candidate countries.

In the part related to monetary policy, the European Commission notes that the institutional framework in Serbia has been established, and the legal framework is “largely aligned” with the EU acquis. The adoption of amendments to the Law on the National Bank of Serbia in March 2025, which further brings it closer to European standards, is cited as a positive step.

However, Brussels warns that further changes are needed to ensure the full functional, institutional, personnel and financial independence of the NBS. This includes amendments to the Law on Public Property. When it comes to economic policy, Serbia’s legal framework is assessed as partially aligned with EU rules.

The 2025 budget presents capital projects in a three-year plan for the first time, and a methodology for marking green investments has been introduced. However, the introduction of a tax expenditure review has been postponed again.

The European Commission emphasizes that further harmonization requires amending the Law on the Budget System to introduce more realistic macroeconomic and fiscal projections, a three-year consumer perspective, greater transparency and harmonized statistical and accounting reporting.

The excessively large budget reserve fund, which has been used for ad hoc expenses without clear rules in recent years, is particularly criticized, which is why the EU recommends stricter limits and regular reporting on its use.

Brussels also stresses that the budgetary procedure must be respected, especially in the part related to the budget rebalance, while public participation in the budget process and parliamentary oversight need to be further strengthened. In recent years, extraordinary budget interventions have been frequent, which, as stated, “should be avoided.”

Although the institutional framework is assessed as well developed, it is necessary to strengthen program budgeting, as well as administrative and IT capacities that support the planning and monitoring of public spending, the report states.

On January 15, 2025, the Serbian Government submitted its Economic Reform Program for the period 2025-2027, which, according to the Commission, had a good analytical basis. The key reforms remain the same as in the previous cycle and are aligned with the Reform Agenda, but the implementation of the recommendations adopted within the framework of the Economic and Financial Dialogue of May 2024 was assessed as only partial.

In short, the European Commission concludes that Serbia is on the right track, but that meeting the membership criteria in the areas of economic governance and monetary policy requires greater consistency, less political flexibility in spending, and more institutional discipline.

Narodna banka Srbije Beograd

European Commission

National Bank of Serbia

public finance

amendment of Budget System Law