IMF warns Serbia - "It risks fiscal shock from prolonged NIS resolution"
Serbia faces a fiscal impact of 1-2% of GDP if negotiations on the issue of its sole Russian-controlled refinery, NIS, sanctioned by the US, are prolonged, the International Monetary Fund (IMF) stated.
In January, the US Treasury announced sanctions on NIS, which is indirectly controlled by Gazprom, due to its Russian ownership. After several stipulations, the restrictions went into effect in October, forcing NIS to shut down its refinery. The US Office of Foreign Assets Control (OFAC) has requested a full exit of the Russian owners from NIS and has approved ownership negotiations by February 13.
IMF staff said in the report that if the NIS resolution is prolonged, revenues will fall as economic growth slows. At the same time, expenditures will increase due to higher unemployment benefits, social assistance, and additional energy support for needy households.
Failure to reach a consensual solution for NIS could add to the cost of more expensive Russian gas supplies and, if no foreign buyer for NIS is found, would require between 500 million euros and 2 billion euros in fiscal funds, with a similar impact on the balance of payments, according to the report.
IMF staff said that if short-term efforts to resolve the NIS fail, the resulting fiscal costs would force the government to reprioritize investment, cut lower-priority spending, and provide targeted and temporary support to needy households. In contrast, a state purchase of Russian stocks, financed by attracting sufficient government deposits as a below-interest rate transaction, would not increase the fiscal deficit nor would it require additional spending cuts.
On Tuesday, Serbian President Aleksandar Vučić said that Gazprom is in talks with Hungarian oil company MOL to sell part of the 56.15% stake it indirectly controls in NIS. Earlier this month, the Financial Times reported that Abu Dhabi National Oil Company (ADNOC) had emerged as the leading candidate to buy the shares, noting that the Serbian company was still in talks with other potential bidders, including MOL.
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