Serbia increased fiscal spending during the first half of 2026 to finance infrastructure, defence procurement, public-sector wages, energy security and preparations for Expo 2027, while retaining access to international debt markets. The consolidated budget deficit reached approximately RSD55.8 billion (€475 million) in the first six months, compared with RSD21.3 billion in the corresponding period of 2025. Despite the year-on-year increase, the result remained substantially below the government’s original first-half deficit plan. For the full year, the budget allows a deficit of RSD337 billion, equivalent to approximately €2.9 billion or 3% of GDP. Planned capital expenditure amounts to around RSD602 billion (€5.1 billion).
Capital spending includes Expo and NIS provisions
The 2026 budget allocates RSD47.5 billion for preparations related to Expo 2027. A further RSD164 billion, approximately €1.4 billion, has been set aside as a potential financial envelope connected with Naftna Industrija Srbije (NIS). The scale of planned expenditure is supported by Serbia’s moderate public-debt position, substantial foreign-exchange reserves and continued access to international capital markets. The government demonstrated that access in April with its first multi-currency international bond transaction.
The transaction comprised a €1 billion five-year bond with a 4.25% coupon, a €900 million 12-year green bond carrying a 4.875% coupon, and a $1.25 billion 10-year dollar bond with a 5.5% coupon. The dollar-denominated exposure was hedged into euros, resulting in an effective euro funding cost of approximately 4.66%.
International demand remains strong for Serbian debt
Investor orders for the international issuance exceeded €8 billion, indicating strong demand for Serbian sovereign securities. Part of the proceeds was used to repurchase bonds due in 2027, extending the maturity profile of government liabilities and reducing refinancing requirements in the near term.
The domestic government-securities market is also attracting increased foreign participation. Five-year dinar bonds have been issued at yields close to 5%, supported by exchange-rate stability and positive real returns. Foreign ownership of dinar debt remains well below levels recorded before the pandemic. Investors continue to attach a premium to dinar liquidity, political risk and the role of the central bank in maintaining currency stability.
Sovereign financing remains stronger than direct investment
Conditions in Serbia’s sovereign debt market currently provide a stronger financing signal than the country’s direct-investment flows. Portfolio investors have shown confidence in Serbia’s foreign-exchange reserves, public-debt ratio and capacity to refinance its obligations. Strategic investors require broader assurances concerning electricity supply, legal predictability, labour availability, EU relations and long-term access to export markets.
The main fiscal challenge extends beyond 2027, when the construction cycle associated with Expo-related investment is expected to slow. Expo expenditure is supporting GDP, employment and tax revenues during the construction period. Once that activity declines, private investment and export growth will become more important sources of economic expansion. Infrastructure capable of eliminating transport, energy and logistics bottlenecks can support that transition. Projects with limited commercial utilisation, however, could leave the state responsible for continuing operating and maintenance expenditure after the temporary construction contribution to economic activity has ended. Serbia retains substantial borrowing capacity, while the effectiveness of additional public capital expenditure increasingly depends on the economic returns generated by each investment.
