BELGRADE: Serbia should extend its public sector pay freeze into 2017 and keep pensions flat through 2018 to get its finances in order, the government’s top advisory body said on Monday.

The government cut wages and pensions by up to 10 percent in 2014 to secure a

1.2 billion euro loan from the International Monetary Fund. In January 2016 it announced a slight rise, but not enough to get incomes back to pre-cut levels.

The advisory body, the Fiscal Council, said in a report: “A freeze in wages in 2017 and in pensions in 2017 and 2018 would bring savings of around 2 percent of gross domestic product.”

“The biggest problem for Serbia’s finances is overly high public debt, which in 2016 is seen at 26 billion euros or 78 percent of GDP. For the public finances to recover, debt should be reduced to well below 60 pct of GDP,” the Council said.

Average wages in Serbia are around 400 euros a month, among the lowest in the Balkans, with pensions about half that. The public sector typically pays more than private employers.

Serbia hopes to join the European Union in 2020, but is struggling to meet EU demands to reduce state involvement in the economy where growth is slower than other countries in the region.

Under its deal with the IMF, Serbia agreed to slim down its public sector and sell or close unprofitable state companies.—Reuters