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Abstract

This paper will examine whether the privatization receipts were used as a means of reducing the fiscal deficit and public debt servicing in the Republic of Serbia. The empirical study incorporates monthly data series from 2005 to 2012. The results of the study show that revenues from privatization in Serbia increased the fiscal deficit and public spending, and thus jeopardize the long-term fiscal sustainability. The paper analyzes the level of reduction of external debt and the movement of foreign exchange reserves as an alternative to the use of privatization funds. The analysis shows, although on the short sample, that revenues from privatization in Serbia are not used to pay off debt, but were partially preserved (and accumulated in the form of foreign currency reserves) and partly used to finance current expenditures of the state (and to a lesser extent for financing capital expenditures).

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