The government of Serbia has long focused on modernization, macroeconomic stability, socioeconomic and governance reforms with European Union accession as an overall objective. Serbia officially applied for EU membership in 2009; it was granted EU candidate status in 2012, and in 2014 the accession negotiations commenced. It is able to become an EU member state in 2025.

As one of the post-Yugoslavian countries, Serbia is facing a number of challenges influenced by the crash of the socialism system, civic war, and the sharp economic decline of the 1990s. The main challenges include ensuring tight management of the government austerity, economic recovery and growth agenda at the central and local levels, and adjusting the institutional architecture and strengthening capacities required for European integration. The EU integration outlook is somewhat hindered by the issue of Kosovo relations normalization, and weaknesses related to fulfilling economic criteria, such as the relatively high level of informal employment, unemployment, the underdeveloped private sector and an unpredictable business environment with difficult and costly access to finance.

 Public Finance for Development in Serbia

SINCE: 2018

EU countries, EU candidate countries and neighboring countries are Serbia’s closest political and economic partners. The country is a traditional partner of Slovakia. Both countries share similar political and economic developments. The entire Western Balkans region, including Serbia, is among territorial priorities for development cooperation of the Slovak Republic for the 2019 – 2023 period.

ACTIVITIES: Supporting good governance and building strong institutions is one of the main UNDP priorities in Serbia. The partnership between the Ministry of Finance of the Slovak Republic and the UNDP focuses primarily on public finance management at the local level. Slovakia is currently the only donor in Serbia, active at the local level.

I. Support for Improving Governance and Economic Planning at the Local Level

Regional disparities in the Republic of Serbia are among the highest in Europe. Ineffective governance practices decrease the capacities and the ability of local self-governments (LSGs) to implement reform and manage complex activities related to municipal planning and economic development. Although the majority of them have Sustainable Development Strategies in place, these are not being updated on a regular basis to address the changing circumstances and local self-governments´ needs. Budgets are still mostly planned annually in spite of legislative requirements that take into account three-year investment needs. This usually makes it impossible to implement investment plans.

Bearing in mind the complexity of these challenges and needs of local self-governments in Serbia, the project intervention opted for a multi-layered approach. Its overall goal is to improve the public finance management at the local level. The programme supports selected local self-governments in the following activities:

  • Assessing and identifying governance issues– primarily those related to the internal organization, internal control, and resources allocation.
  • Designing and updating policies, regulations, policy and planning documents.
  • Building the capacities of local administrations in project planning and implementation in order to increase their absorption capacities for external financing.

Self-governments participating in the project are to become a role model for others. The project creates a methodology for implementing changes that can be applied to other cities and municipalities. Improving the management and planning capacities of local self-governments is in line with the National Strategy for Sustainable Development, the Public Administration Reform Strategy . The project takes into account national legislation governing the functioning and financing of local self-governments and institutions, as well as business development.

II. Support to the Ministry of Finance and Tax Administration Office in Serbia

In 2019, the cooperation focused on support to the tax administration reform, specifically the development and improvement of taxpayer identification function for control purposes and control risk management. The objective of the technical assistance provided by Slovakia was to establish an effective risk management system as part of the planning and decision-making process to detect and avoid tax evasion in Serbia.

The Development Plan and Mid-Term Plan of local self-governments (LSGs) ensure that measures and activities are planned in a realistic manner to achieve the priority goals of the LSG and the goals of public policies at the national level. It also enables a clear understanding of obligations related to the EU accession process that are implemented at the local level. The assistance received through Public Finance for Development programme is important for the reform of the planning and budgeting system.

Bojana Tošić

Director of the Public Policy Secretariat - Republic of Serbia