With its economy disrupted by the globaleconomic crisis, the Serbian government faces tight budgetconstraints for several years to come. The Government hasalready responded by freezing wages and pension benefits andmaking cuts in capital works and other discretionaryspending. These measures, while effective in the short term,are not necessarily sustainable over time. This report looksat more fundamental reforms in key public services, in orderto identify opportunities for constraining expendituresthrough improvements in productivity. In 2010, the principalexpenditure savings will instead continue to come from shortterm controls over expenditure aggregates: the freeze onpensions and wages and cuts in discretionary spending andcapital works. The impact of the efficiency measures in thisreport will take more time to materialize. The Governmentshould, nevertheless, make an immediate start. While thefiscal impact of these reforms will be evident over themedium term, their most important impact will be on thequality of public services. The reforms will stand Serbia ingood stead even after economic growth resumes.