BELGRADE (Reuters) - Serbia plans to borrow billions of euros from China and other foreign countries in the coming years to fund investment in regional projects, its infrastructure minister Zorana Mihajlovic said on Friday.
China views Serbia and other Balkan countries as part of its ambitious One Belt, One Road initiative to open trade links for Chinese companies.
Over the past decade Beijing invested billions of dollars in the impoverished Balkan region, mainly through Chinese banks and companies to build railways, roads and power stations.
Serbia wants to join the European Union and to do so it must strengthen economic links with its neighbors including former Yugoslav republics, most of them foes from the bloody wars of the 1990s.
So far the Balkan country has attracted projects worth a total of 14.5 billion euros ($16.3 billion), including those from China and Russia, Zorana Mihajlovic, country’s infrastructure minister told Reuters in an interview.
“Ongoing Chinese (infrastructure) investments ... are almost 5 billion euros ($5.62 billion),” she said.
The Serbian government hopes that infrastructure deals will give a boost to country’s economy. It is expected by the IMF and central bank to grow by 3.5% this year, down from 4.4% a year earlier, and around 4% annually between 2020 and 2022.
“The state must start new investments if it wants continuous economic growth or we could have major problems,” said Mihajlovic who also serves as the Deputy Prime Minister in Ana Brnabic’s Cabinet.
To achieve that, Belgrade plans to invest up to 8 billion euros in the medium term in infrastructure, mainly through deals funded by China, but also Russia, Turkey and Azerbaijan, as part of a wider 10 billion euro development plan made public by President Aleksandar Vucic last month.
Mihajlovic said Belgrade is eyeing a 400 million euro deal with Russia for the reconstruction of a railroad link with neighboring Montenegro’s Adriatic port of Bar. It also plans to invest 150 million euros from Russia in a new railway traffic control center.
Turkish companies will be building a road link with neighboring Bosnia and a major road in Western Serbia will be constructed by Azerbaijan’s AzVirt in a 370 million euro deal, she said.
Belgrade also wants to reconstruct a major railway to Macedonia in the south, Mihajlovic said.
“The project documentation is currently being made by China Road and Bridge Corporation (CRBC) ... It is estimated that all of it (entire project) is worth about 600 million euros ... and we will see who can do it,” she said.
Over the past decade, Chinese companies bought Serbia’s sole copper mine, a steel plant and invested in power production. In 2017 Serbia and Hungary also started construction of a Chinese-funded rail link between Belgrade and Budapest.
Mihajlovic sought to dispel fears Serbia could overburden itself with debt levels similar to that of Montenegro which borrowed heavily from China to build its own highway.
“We did not start anything without being sure we could offer guarantees for it,” she said.
Serbia ended 2018 with a small surplus and its 2019 spending plan envisions a deficit of 0.5%. The country’s total public debt at the end of May stood at 51.8% of gross domestic product.
($1 = 0.8890 euros)
Reporting by Aleksandar Vasovic; Editing by Toby Chopra