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Serbia plans to spend 14 billion euros by 2025 to boost growth

BELGRADE (Reuters) – Serbia plans to spend around 14 billion euros ($15.7 billion) between 2020 and 2025 to boost living standards and help bring vital infrastructure closer to standards in the European Union, President Aleksandar Vucic said on Saturday.

The plan comes ahead of national elections due in late April or early May, with Vucic and his ruling Serbian Progressive Party facing weekly opposition protests and scandals involving top officials.

“We have ample room to further bolster growth which was very good (so far),” Vucic said after presenting the program which the World Bank helped develop and which envisages investment of around 9 billion euros in infrastructure such as road and rail.

The rest of the investment, to be financed through borrowing, would be spent on projects including environmental protection, hospitals, schools, and measures to improve the business climate such as cutting red tape.

Under the plan, which also aims to help counter the outflow of workers to the West, public sector wages are expected to rise to an equivalent of 900 euros a month by end-2025 from 500 euros. Pensions will be increased to around 440 euros from 225.

Serbia, which is set to end 2019 with a small deficit, would finance the plan through borrowing. It plans to auction treasury bonds worth 55 billion dinars ($523 million) with maturities of five and 12 years in the first quarter of 2020, and 350 million euros of euro-denominated bonds with maturities ranging between two and 20 years, according to its Debt Agency calendar.

The country’s deficit next year is set to be 0.3% of gross domestic product. Its public debt at the end of November stood at 52.4% of GDP.

Serbia’s economy is forecast to grow 4% this year, surpassing the 3.5% growth seen by the International Monetary Fund, which has a 30-month non-financial and advisory arrangement with Belgrade.

The dinar, kept in a managed float by the central bank, remained stable in 2019, although its exchange rate to the euro has come under persistent upwards pressure. The central bank’s benchmark rate <RSCBIR=ECI> in December stood at 2.25%.

Vucic said the dinar would remain stable in coming years with an exchange rate of between 117 and 120 to the euro. On Friday it closed at 117.45 to the euro.

($1 = 105.0800 Serbian dinars)

(Reporting by Aleksandar Vasovic; Editing by David Holmes)

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