Serbia's next PM readies 2014 budget revision by end-June

BELGRADE, April 27 (Reuters) - Serbia's next prime minister, Aleksandar Vucic, said on Sunday his government plans to revise the 2014 budget by the end of June to reduce a deficit that threatens to exceed 8 per cent of national output.

Serbia's 2014 consolidated budget deficit is set at 7.1 per cent of gross domestic product (GDP), but the government's top advisory body warned the gap would surpass 8 per cent due to overspending in the first half of the year.

Vucic presented his programme to parliament, which is expected to vote on his new cabinet later in the day.

He said his government will continue negotiations with the International Monetary Fund to agree a loan deal that would reassure investors and potentially cut the country's borrowing costs.

To win the deal, his government will have to curb the public sector, reform the ailing pension system and cut subsidies to loss-making state-owned companies.

One of the first steps would be to cut public-sector salaries by 10 per cent, Vucic said.

Vucic takes power on an unprecedented mandate from voters.

His Progressives took 158 seats in the 250-seat parliament in the March 16 election, but has offered posts to the Socialist Party of ex-Prime Minister Ivica Dacic and several non-party technocrats.

Since Serbia emerged from international isolation in 2000, successive governments have fudged any attempt to downsize the public sector, which employs nearly 800,000 people, fearing job losses could cause social unrest in the impoverished country. "One or two years on the same path would lead to the Greek scenario (in Serbia)," Vucic told parliament.

Vucic said his government would aim to achieve savings of 1.5 billion euros (S$2.61 billion) a year to curb the deficit to between 3 and 4 per cent of GDP by 2017.