BELGRADE – Serbia said yesterday it would tighten public spending in the second half of 2004 so that it could end the year with single-digit inflation, signaling to thousands of protesting workers that they should forget about higher wages. Belt-tightening was inevitable as the government has already piled up a 17.2-billion-dinar ($297.1 million) budget deficit, with a 30-billion shortfall planned for the whole year, Finance Minister Mladjan Dinkic told a news conference. The 30-billion-dinar budget gap – 2.5 percent of gross domestic product – had been the key for Serbia to win renewed assistance from the International Monetary Fund in June. «In order to meet the 2.5 percent target and considering that we have had zero privatization receipts so far this year, it is necessary to have even tighter monetary and fiscal policies in the second half of the year,» Dinkic said. «Otherwise, we would fuel inflation, deplete foreign exchange reserves and ruin the dinar. And we must end this year with a single-digit inflation,» Dinkic said. Some government ministers have warned that 2004 inflation could touch 10 percent rather than the originally planned 8.5 percent, but Dinkic said it would not exceed 9.5 percent. He said not even an expected 6.0 percent GDP growth would allow higher salaries as the majority of state-owned firms and budget beneficiaries have already increased their total payrolls by 8.5 percent – the permitted increase for 2004. «Our message to all protesting workers is that the government will not allow any further wage increases beyond the 8.5 percent limit. Once Serbia gets richer, we can talk about higher wages,» he said. Dinkic was referring to thousands of workers who have protested for weeks countrywide, demanding higher wages and an end to privatizations, seen by many as unjust. An average monthly wage in Serbia is around 200 euros ($247.7). «It all now depends on privatizations. The process must move on, because it is the key to boost exports and increase GDP in the long term. Much of this year’s growth, which we expect at 6.0 percent, results from past privatizations,» Dinkic said. «We can discuss higher wages only after we get cash from privatizations,» he said and added that the state would pay no more subsidies to state-owned firms that resist restructuring and privatization. Dinkic said the protests had been aimed at toppling the government and instigated by media and telecoms tycoon Bogoljub Karic, who had set up his own political party after a debut in June presidential election, in which he came third. Karic and Dinkic have waged their war since 2001, when Dinkic, then the central bank governor, closed down Karic’s Astra Banka citing some irregularities. The government of Prime Minister Vojislav Kostunica recently ruled that Karic was no longer a majority stakeholder in Serbia’s GSM operator Mobtel.