Draft Budget and Fiscal Strategy of the Republic of Serbia 2025-2027: Lack of a Transparent, Development-Oriented, and Institutionally Grounded Fiscal Policy

The National Convention on the European Union (NCEU) has submitted to the relevant institutions of the Republic of Serbia (the Government, the Ministry of Finance, the National Assembly and parliamentary groups) its analysis of the 2026 Draft Budget and the Fiscal Strategy for 2025–2027, together with recommendations for improvements in the next budget cycle.

The analysis highlights systemic shortcomings that constrain Serbia’s development potential and limit its capacity to prepare for EU membership: the absence of a coherent strategic planning framework, politicized decision-making, pronounced opacity of budgetary procedures, and a bias toward large, ad hoc politically motivated measures rather than programs that raise productivity and strengthen the country’s long-term development prospects.

Structural weaknesses in economic policy undermine the competitiveness of the economy. Real appreciation of the dinar and rising production costs for exporters, combined with the lack of productivity-enhancing programs, have resulted in declining private investment and, for the first time in 2025, stagnating or even falling exports among domestic small and medium-sized enterprises.

Without fundamental reforms, Serbia’s social and economic development will remain trapped in low GDP growth without substantive societal progress, accompanied by a further widening of economic disparities among citizens.

Key Recommendations

Transparency and Accountability:

In managing public investments, and in parallel with meeting the obligations set out in the Reform Agenda (adoption of the position paper and Action Plan by the end of 2026 and phasing out exemptions from public procurement by the end of 2027), establish a publicly accessible platform to monitor all public investments. This should include publication of all contracts, investment plans, implementation tracking, and associated procurements with explanations, even for projects that fall under procurement exemptions.

Despite the launch of the budget portal and the Ministry of Finance’s formal “call to citizens,” it is essential to genuinely open the consultation process with stakeholders well before the Government prepares the draft budget. Consultation must take place through an inclusive and accessible participation mechanism, not through limited activities based on quizzes or closed online formats.

Significantly increase transparency of major projects and programs, ensuring that all interlinked expenditures are presented in a connected and comprehensible manner.

The draft budget should be presented alongside an assessment of the current year’s execution, and the explanatory memorandum must include a clear overview of in-year performance. This enables the public to understand the context in which the budget is being adopted and to assess whether projections for the following year are realistic.

Regulatory and Strategic Framework:

Initiate the preparation of the Development Plan and Investment Plan in line with the Law on the Planning System, with proactive involvement of all relevant stakeholders.

Restart and complete the reform of the public sector wage system by adopting a new systemic law and secondary legislation. Building on principles from the former (now invalid) 2016 Public Sector Wage System Law, the reform should introduce transparent pay grades and clear criteria for career advancement and performance-based remuneration.

Introduce mandatory social cost-benefit analyses before the commencement of any major investment project.

Limit the size of the current budget reserve and logically and quantitatively link it to the risks for which it is intended. At the same time, increase transparency in its use and ensure full coverage of the purposes identified in the risk assessment.

Development Orientation and Support for the Economy:

Eliminate tax discrimination against small and medium-sized enterprises (SMEs) relative to large companies, as part of aligning tax schemes with the EU state aid system, an obligation already announced in the Reform Agenda.

Establish a national guarantee fund to support SME exports, with a minimum allocation of EUR 15 million, drawn from the unexplained budget line “investments of special importance.”

Reduce the tax burden on the lowest wages and increase progressivity in taxation, in line with long-standing recommendations from civil society and good international practice.

Shift support away from simple subsidies towards programs that build capacities and synergies, creating added value beyond the direct cost of intervention.

Sectoral Reforms and EU Accession Preparedness:

Establish a Green Fund together with a reform of environmental fees, including the introduction of new charges required under CBAM-related regulations (the Law on GHG Emissions Tax and the Law on the Carbon-Intensive Imports Tax).

Urgently begin preparing transformational programs to reduce emissions and adapt to climate change, in line with ongoing regulatory shifts within the EU.

Launch substantive reforms in key sectoral policies: agriculture, healthcare, education, and social protection.

Development planning and programmatic thinking, supported by broad involvement of citizens and the business community, are essential to identifying priorities that genuinely strengthen productivity and create developmental synergies. Implementing such programs requires robust institutions capable of acting with clearly defined objectives. Without strong, decentralized institutions that enable coordinated action across society and the economy, Serbia cannot advance nor become adequately prepared for EU membership.

A detailed analysis of the budget and fiscal policies is provided in the annex to this statement.

Belgrade, 28 November 2025