Is the “Leap into the future - Serbia EXPO 2027” program really a leap into the future or a plunge into debt slavery? At this moment, it is a question whose answer depends on the side it comes from. The government argues in favour of the first and the Serbian New Deal under whose umbrella Serbia would make a quantum leap in the economy, which would raise the GDP from last year’s EUR 69 billion to even up to EUR 100 billion, and the majority of the professional public and the opposition advocate the second answer, and a project that will put a heavy burden on many generations to come.
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Meanwhile, no one is asking the citizens, although they will probably repay most of the EUR 18 billion, how much the “leap into the future” will cost us in the next three and a half years. According to the officials‘ estimates, the value of the leap has shot up with the speed of lightning by EUR 6 billion!
At this moment it is unclear what exactly has so drastically pushed up the costs of investment for EXPO 27, which bears the slogan “Game(s) for humanity - sports and music for all”. What is more certain, and perhaps a burning issue at this moment, is that EXPO will be largely financed from long-term loans, we can be sure already now that this is the case, based on several quick but massive steps taken and implemented by the government just over the past few weeks.
Running into debt
Since the middle of October, to be precise, in about a hundred days, Serbia has already borrowed four times through the sale of bonds for the EXPO. Works are not yer underway and the government has already borrowed more than one billion euros!
And all this for a period of eight years, with an interest reaching 7 percent! The enormous debt we are talking about is best described by comparing the amount with this year’s planned budgetary allocations for EXPO. According to the Budget law for 2024, RSD 22.6 billion have been allocated for EXPO investments, i.e. for buildings and construction facilities, through the Ministry of Finance. This is approximately EUR 188 million, which is the sixth of what was planned and implemented through borrowing for the previous hundred days.
The government went into the first debt for EXPO in October last year, when it issued bonds worth RSD 19.19 billion. It was a debt with an interest rate of 6.39 percent and a maturity date in 2031.
NIN / Milan Ilić
The second debt was incurred two months later, RSD 90 billion, also with a repayment period of eight years and an interest rate of 6.3 percent. The third followed in January and the fourth in February of this year.
In total, so far, there is a debt of RSD 150 billion, which is the total amount according to the Government‘s decision on the issue of long-term government bonds, which, as stated, will provide funds to support infrastructure projects within the framework of the EXPO 2027 exhibition. In response to the question addressed to the National Bank of Serbia: “How much more debt will we incur for EXPO?”, the Central Bank referred us to the Ministry of Finance. But the competent ministry did not provide an answer. In the meantime, we received an official information from 11 Nemanjina Street that at the end of January the Government decided to increase the value of the eight-year EXPO bonds to a total of RSD 150 billion, i.e. 40 billion more than the original issue. Hence, a total EUR 1.2 billion for this year and two months of the previous year.
Interests as a motive
At all events, what is certain is that the investors are willing to redeem the government debt and EXPO bonds. The two auctions had realization rates of approximately 93 percent. And while the National Bank of Serbia boasts that this is a sign of confidence of large international and local investors in our country, economists claim that their only motive for buying is relatively high interest rates, at a moment when central banks have not yet begun to relax their monetary policy.
“There is no doubt that the demand is motivated by the high interest rates offered, which went up to 6.3 percent, and especially if one takes into account that they are expected to drop in the coming period, so positioning in these securities is highly profitable at such rates”, we were told in a financial institution by people who, by the way, have invested in these bonds.
Goran Radosavljević, professor at the Faculty of Economics, Finance and Administration (FEFA), also doubts the profitability of the entire project, which, in addition to debt repayment, could result in additional costs for citizens and the government. In other words, new debts.
“There is no feasibility study, so we cannot make an assessment whether all this could have been implemented at a cost of EUR 8 billion, instead of EUR 18 billion.” A simple analysis shows that six billion per year will be allocated for facilities in this program, which is 10 percent of GDP, while allocations for all capital investments amount to 7 percent of GDP per annum. I believe that there is a certain megalomania, since there is a lack of capacity for certain things. First of all, I think of the construction companies, which will not be able to implement everything that has been planned”, said Radosavljević for NIN.
He adds that lex specialis is a black hole of the entire project.
“Even if done with best intentions, there is a possibility of corruption. With this kind of law, the system will only work for the elect. At the same time, it is unclear what benefits the citizens will have from the constructed facilities. The funcionality of the facilities is also questionable and it is possible that the maintenance costs, in addition to the debt, will be borne by the government”, says Radosavljević.
The economist Saša Đogović does not dispute the fact that during the construction period EXPO will bring added value and higher GDP because it will employ the construction industry. A strong impulse for the economy will be brought by visitors from all over the world.
“But what will happen in 2028 and why will contracts be awarded without a tender? There are no clear signals as to what will happen with that facility and what it will showcase, in order to repay the loan, since EXPO projects will mostly be financed from loans. This will probably increase the debt from around 51 percent of GDP to 60 percent,” Đogović explains for NIN. Transparency International has a similar doubt, which in its latest report, in which Serbia scored the worst ranking in the last 12 years and fell from the 101st to the 104th position, highlights several facts.
“In Serbia we can observe a collapse of democracy, where the autocratic government uses special laws to limit transparency with respect to large projects. The law that has been recently adopted opens the way to spending at least one billion euros of public funds, allocated for EXPO 27, at inflated prices or on construction works of lower quality than the works that would be contracted in competitive and transparent procedures”, it is stated, among other things, in the report of this organization.
All things considered, the question is whether the EXPO complex can be the engine of development on the scale that the government is bragging about and whether it is a perfect solution for the Government to stay in power until 2027. Until then, Serbia will be dancing and singing for the EXPO, but time will show who will be paying for the dancing and singing and at what cost.
