BELGRADE, Serbia, March 6, 2014 /PRNewswire/ --

The Republic of Serbia has today signed an agreement for a $1 billion loan from the United Arab Emirates.

The loan is provided on highly favourable terms with a fixed interest rate of just two percent and a grace period of 10 years - a clear demonstration of the international investment community's confidence in the Serbia.  

The agreement comes at a critical time and will assist with the Finance Ministry's plans to put the country's public finances on a sustainable long-term footing.  

First Deputy Prime Minister Aleksandar Vučić said: "We are delighted to sign this agreement on behalf of the Serbian people and look forward to future cooperation with our strategic partners in Abu Dhabi. We are proud of the uniquely favourable terms of the loan as these a real illustration of international confidence that Serbia will fulfil its promises.

"The loan will benefit each and every household in Serbia by enabling us to invest in key industries and put Serbia's public finances firmly on the path to long-term health.

"Serbia is gearing up for growth. We are attracting record levels of foreign investment and transforming our public sector as we continue our progress towards becoming a fully-fledged member of the EU."

With the Serbian economy prioritising investment, the UAE loan facility enables the Government to do so in a highly efficient way. Borrowing the equivalent amount on the international capital markets under current conditions would have cost Serbia $40 million more each year or $300 million over the lifetime of the loan.

The money is due to be withdrawn in the second quarter of 2014, once the loan arrangements have been ratified by the National Assembly of the Republic of Serbia.  

Serbia is fast becoming an integral part of the European and global economic community. EU accession negotiations opened earlier this year and today's loan facility also demonstrates Belgrade's close collaborative relationship with Abu Dhabi.

In recent months, UAE sovereign fund Mubadala signed memorandums of understanding on potential investments in semiconductor facilities, data centres and aerospace manufacturing in Serbia. Last year Etihad Airways agreed to buy 49 percent of Serbia's loss-making Jat Airways in a unique deal to support the new national carrier and open the country to a new generation of tourists and business travellers.

Notes to editors

The Republic of Serbia is located at the crossroads of Central and South-Eastern Europe with a population of 7.12 million. Serbia became a stand-alone sovereign republic in the summer of 2006. The capital of Serbia and the country's administrative, economic and cultural centre is Belgrade, with a population of 1.64m.

Serbia is the biggest and most diversified economy in the region with a GDP of €35.28 billion.  This is predicted to grow at an average annual rate of 5.8% until 2020 under the current Government's programme focused on investment growth. With a corporate tax rate of 10% - the lowest in Europe - Serbia offers an attractive business environment and the volume of foreign direct investment (FDI) is growing rapidly. In the first quarter of 2013, FDI inflow was €330m compared to €180m in the same period of 2012. During the same period, there was also a 25% increase in exports.

For more information on Serbia, please visit: http://www.serbiaineurope.com/

SOURCE The Government of the Republic of Serbia