Davos: Serbia may stay away from international markets for a third year and shelve a bond sale worth a billion euros (Dh3.9 billion, $1.1 billion) if it obtains cheaper cash from the UAE, Prime Minister Aleksandar Vucic said.

The biggest former Yugoslav republic may not need all of the external financing planned in the 2016 budget to repay debts and finance a fiscal deficit of around 4 per cent of economic output, Vucic said in an interview on the sidelines of the World Economic Forum in Davos, Switzerland.

“I think we’ll need $1 billion — not more than that — so why take $2 billion?” Vucic said. “If we’re going to get it from our UAE friends, that’ll be best.”

Vucic’s financing outlook points to Serbia tapping only a fraction of the amount envisioned in its 2016 budget. On top of a domestic-bond issuance plan, the budget includes borrowing of as much as $2 billion in loans from the UAE and 1 billion euros in a new foreign bond to repay debt and finance the deficit. A 10-year UAE loan would carry 2 per cent interest, he said.

The yield on Serbia’s dollar bond maturing in 2021 fell four basis points to 4.766 per cent on Thursday, just off its highest level in three months. The dinar was little changed at 122.80, near its weakest in almost a year.

IMF deal

Vucic, in office since April 2014, has committed to a three-year austerity program with the International Monetary Fund aimed at narrowing the budget deficit and halting the rise in public debt, which may top 80 per cent of gross domestic product before starting to decline.

His government cut public wages and pensions to trim the budget deficit in the first year of the program. A plan to deal with a large public administration and unprofitable state- controlled companies should follow this year and next for additional budget savings.

Vucic, the leader of the dominant Serbian Progressive Party, has decided to call early elections two years before his term ends, seeking four more years to carry out unpopular reforms and prepare the country for European Union membership by 2020. Using early elections to consolidate their position for the second time since 2012, Vucic’s Progressives already have the strongest lock on power by a single Serbian party in more than two decades, with 135 seats in the 250-member parliament.

The ballot, which may be called for late April, will not affect the government’s commitment to overhaul the economy, shrink the public sector and narrow the budget gap, Vucic said. The post-election agenda includes renewed effort to divest some stake in Telekom Srbija and effort to sell the Belgrade airport and won’t endanger the IMF deal, he said.

“We’ll stay within the programme, and I think we’ll pass the review which is going to take place from Feb. 18 to March 1,” he said. “It will be OK.” He also said he doesn’t expect the Washington-based lender to freeze the program during the election campaign.

Asset sales

After an attempt to sell Telekom Srbija failed last month, Vucic said his government wants to “resume talks with those who were the best bidders and see whether we can sell minority stakes. I think we can do it.”

Serbia is also keen on selling the Belgrade Airport Nikola Tesla by the end of 2016 or early 2017. Among “several companies” that applied to advise his government on the sale is Credit Suisse. The government expects both sides to “change their attitudes a bit” to find a solution for high fees before selecting the consultant, Vucic said.