No increase in public sector salaries until recession over

Belgrade, Jan. 24, 2010 (Serbia Today) - The Deputy Prime Minister and Minister of Economy and Regional Development, Mlađan Dinkić, announced that any increase in public sector salaries before the recession is over would devastate the country’s economy, underlining that there will be no increase in pay checks, according to the Government website (Jan 18, 2010).

Dinkić predicted that the dinar exchange rate would remain stable this year, stressing that foreign currency reserves were at a record EUR 10.5 billion. He pointed out that the dinar has already begun to strengthen. Indeed the dinar declined by only 4% since February 2009, while the inflation rate for the same period was 6.6% to 7%. Dinkić again warned that if demands of the electric power Industry and other public companies for increased salaries were met, it would cause inflation to rocket.

Dinkić noted that the Government and the National Bank of Serbia were not responsible for the drop in the Serbian dinar because demand was greater than supply, which typically happens every December and January when companies buy foreign currencies in order to pay for foreign goods and to repay debts from the previous year. He also pointed out that public spending last year was within the limits agreed upon with IMF and incorporated in the revised budget. He also said it should be determined why Serbia is not withdrawing World Bank loans, which are granted on extremely favorable terms.