Serbia’s public debt increased by nearly €2.5 billion during the first seven months of 2026, while economic growth kept the debt-to-GDP ratio below 44%, according to Finance Ministry data. Public debt reached €41.82 billion at the end of July, equivalent to 43.9% of GDP, compared with €39.34 billion, or 44.4% of GDP, at the end of 2025. The increase of approximately €2.48 billion, or slightly more than 6%, came despite a half-percentage-point decline in the debt ratio.
Capital spending drives additional borrowing
The development comes as Serbia expands a major public-investment programme. The revised 2026 budget allocates around €6.64 billion for general-government capital expenditure, equal to approximately 7% of GDP and about €362 million above the original plan. The programme includes Expo 2027, the Belgrade Metro, motorway and railway construction, as well as other transport and utility infrastructure.
Continued nominal GDP growth allows the government to increase borrowing while keeping the debt ratio stable or lower. Weaker real growth, slower nominal expansion or additional infrastructure borrowing could reverse that trend. Serbia’s debt level remains considerably below that of many European economies, but the growing nominal debt stock is increasing the importance of financing costs and the structure of government liabilities.
Financing costs become a greater fiscal consideration
Interest expenditure is already approaching 2% of GDP, despite Serbia’s relatively low debt-to-GDP ratio. Borrowing costs remain materially higher than those available to euro-area sovereigns, increasing the fiscal impact of additional debt. Serbia is financing its infrastructure programme through a broader mix of international bonds, domestic banks, bilateral lenders, development institutions and local-currency government securities.
Domestic banks are playing a larger role in long-term state-backed infrastructure financing, while Serbia has also allowed selected dinar-denominated government bonds to become accessible to international investors through Euroclear. Greater use of local-currency borrowing reduces direct foreign-exchange exposure, although it leaves the government exposed to interest-rate movements. Some infrastructure loans carry floating rates linked to domestic reference rates, while recent local-currency sovereign borrowing has involved yields of around 5%.
Infrastructure returns remain important for debt strategy
The financial impact of the investment programme will depend on whether debt-funded projects generate sufficient economic benefits over time. Infrastructure can strengthen public finances when it increases productivity, lowers transport and logistics costs, improves energy security or encourages additional private investment. Motorways, railways and energy assets can provide economic benefits over extended periods.
However, higher construction costs, project delays or weaker-than-expected economic returns would increase the financial burden. Cost overruns can simultaneously raise borrowing requirements and the future interest expense associated with additional debt. The scale of Serbia’s current investment cycle means that transport corridors, the Belgrade Metro, Expo-related development and major energy projects are competing for financing, construction capacity and public-sector management resources.
Debt composition gains importance
Serbia’s fiscal position currently provides room to accommodate the investment programme, with public debt remaining below 44% of GDP. At the same time, the increase from €39.34 billion to €41.82 billion illustrates how quickly that fiscal capacity can be used. If annual borrowing repeatedly rises by €2 billion-€3 billion, refinancing requirements would grow substantially even if economic expansion continued to prevent a sharp increase in the debt ratio.
The maturity profile and interest-rate structure are therefore becoming increasingly important. Long-term fixed-rate debt carries different risks from floating-rate bank financing, while dinar obligations have different exposures from euro- or dollar-denominated bonds. The headline debt ratio does not capture these differences. Serbia’s current position is therefore shaped not only by the size of its public debt but also by what additional borrowing finances, the interest rates paid, the duration of those rates and the economic returns generated by the resulting assets. At €41.82 billion, public debt remains below 44% of GDP, while the government continues to use the fiscal capacity provided by that relatively low ratio to finance a large infrastructure investment cycle.
