FT: Serbia IS DIZZYINGLY AFFECTED by increasingly expensive borrowing
Serbia is among the countries of Central and Eastern Europe that are being hit hard by the global economic crisis and that are paying more and more for loans, and the situation in Belgrade is made more difficult by the increasing political isolation from Europe due to its refusal to join sanctions against Moscow, reports the British Financial Times.
The newspaper reports that Serbia has addressed the International Monetary Fund (IMF) and the United Arab Emirates for assistance with coping with rising borrowing costs, which is just an example of the impact of rising interest rates and the economic crisis on Europe’s less developed economies.
The newspaper received confirmation from the IMF that Belgrade had asked for talks on a new stand-by arrangement. With such an arrangement, FT reports, Serbia could count on IMF assistance if it fails to sell its bonds to foreign investors.
Authorities in Belgrade reckon that such an IMF guarantee would prevent Serbia’s borrowing costs from rising further on the international financial market, which have more than tripled since the beginning of this year from less than two percent to more than six percent.
“If you are a stable country, you do not want a stand-by arrangement. But perhaps it is better to show a little humility now to make sure that later you will not have to refinance the debt at an interest rate of more than six percent,“said senior Oxford economist Tamara Bašić-Vasiljev.
According to the British newspaper, along with Hungary and Romania, Serbia isone of the countries in Central and Eastern Europe that has been hit by a dizzying rise in borrowing in recent months, mainly as a result of the decision of the US Fed and the European Central Bank to significantly increase the policy rate.
While borrowing costs have increased throughout Europe, for riskier borrowers, including Serbia, these costs have risen significantly faster.
FT also reports that credit rating agencies have warned Serbia that its public and banking sectors are exposed to risks due to a significant foreign currency outflow.
At the same time, the National Bank of Serbia believes that economic growth is also influenced by economic problems in the EU, which is Serbia’s main trading partner, and the war in Ukraine has influenced the increase in inflation, which reached 13.2 percent annually in Serbia in August.