Government of the Republic of Serbia

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Government of the Republic of Serbia Ministry of
Finance - Sector for Programming and Management
of EU Funds and Development Assistance
IPA DIRECT BUDGETARY SUPPORT EXPERIENCE OF
SERBIA EXPERIENCES, CHALLENGES AND OPPORTUNITIES
The Case of Serbia
Gordana Lazarevic, Assistant Minister
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• Background and context
• Lessons from Serbian experience

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• Background and Context
• Budget Support under Article 15.1 exceptional
  circumstances, requested, granted
• Linked to framework of MIPD and EU focus and on
  PFM fundamentals on other (2 general conditions
  require ongoing macro-stability PFM stability)
• Latter implies i) explicit link to IMF programme
  ii) assessment of PFM dynamics especially
  fiduciary (PEFA norm) although for Serbia there
  was a separate Financial Circuits review

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• Experience
• Process relatively smooth, request submitted on
  March19th, signature of FA on September 17th,
  expected 1st tranche by November Immediate
  absorption
• Conditionality arguably the highest impact under
  IPA programming
• eg external audit of 2008 budget done by early
  October, PFIC/AA under implementation
• acquis-related laws/regulations focussing on
  Single Market state aid, competition, public
  procurement adopted (SAA conditions under
  progress, prior to negotiations)
• updated PEFA earmarked and owned by the Government

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• Early crises detection/recognition mid 2008
• Urgent two tiers coordinated approach/permanent
  consultancy
• - IMF
• - EC
• Government early measures targeted at
• - prevention of banking sector destabilization-
  run on the banks
• - capital outflow
• - deep but controlled depreciation of domestic
  currency
• - budgetary savings freezing of the salaries
  and pensions up to the end of 2010, additional
  temporary income taxation, increase of excise
  charges

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• Crises deeper and longer then expected
• Growth domestic demand driven (-3 by the end of
  2009)
• Budget deficit higher then predicted in spite of
  two consequent upside corrections (5,5)
  pensions -60 of the budget, high redundancy in
  public administration, no additional revenues
  from privatization, subsidies to consumers to
  support demand, losses of VAT due to shrinking
  import and custom duties

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• Realistic insight in the areas where reforms are
  delayed
• Concentration of the efforts to boost these
  processes
• Realistic estimations of the size of budget
  deficit-concentration on the fiscal reforms
• Early, but fragile political consent on the
  measures to be undertaken
• Strong governmental ownership and initiative in
  this process

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• General conditionality a substantial
  macroeconomic and fiscal framework supported by
  IFIs notably through a disbursing IMF
  programme as long as the IMF assessment on
  broad compliance with the programme requirements
  is favourable the general condition for IPA
  budget support is fulfilled
• Administrative and financial circuits
  establishing a sound fiduciary environment
  

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• Specific disbursement conditions
• PFM that credible and relevant programme to
  improve PFM is in place or under implementation
• EU integration in lone with NPI, maintaining and
  further developing the level of legislative
  alignment and administrative capacity necessary
  to meet requirements of the EU integration
  process (institution development, staffing,
  retention policy, DIS in place).

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• Appendix to Annex A Modalities for disbursement
  verification sources and supporting documents for
  tranche release- general and specific
  conditions prior activities
• Base for Governmental plan how to organize mayor
  activities
• Clear task assignment, verification source,
  reporting lines and date for final delivery

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• Lessons and Implications
• Aid effectiveness effective IPA financing
  consistent with broader commitment to ensure aid
  effectiveness and Budget Support one tool in this
• Ownership of Government-clear priorities,
  measures, activities - strong commitment for
  delivery
• Use of the national systems in implementation
  on job improvements
• Establishment of control, monitoring and
  reporting systems in cooperation with relevant EC
  institutions

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• Lessons and Implications
• Budget supports works but consider Europaid
  experience ag ENPI and general and sector budget
  support
• Consider modifying Article 15.1 IPA (1086/2006)
  to allow budget support on non-exceptional basis
• Impact on EU accession progress higher if Budget
  support is used as part of broader mix of tools
  but require robust focus on programming and link
  to impact indicators PAR and capacity building
  of civil service is becoming an undisputable
  priority

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Contact Ministry of Finance Sector for
Programming and Management of EU funds Kneza
Milosa St. 20 11000 Belgrade Serbia gordana.lazare
vic_at_mfin.gov.rs Phone [phone]
30 WWW.EUROPA.SR.GOV.RS