Pensions are the largest single program of government expenditure. Costs are high, due in part to generous benefits. The pension due to a new retiree in Serbia is equal to nearly 60 percent of the net average wage. As a short term response to the fiscal crisis, the Government has decided to freeze pension levels in nominal terms in 2009 and 2010. In the longer term, the existing system of pension indexation will substantially reduce the financial burden of the pension system.

Despite an array of management improvements to date, the Serbian health care system still suffers from a wide range of inefficiencies. The Government is now in the process of reforming the health financing system. For primary care, it will adopt a capitation based payment system, in which primary physicians are paid according to the number of patients on their rosters. For higher level (hospital) care, the Ministry of Health and the Health Insurance Fund intend to move to an output-based (Diagnostic-related Group) or prospective hospital payment) system.

The level of government spending on education in Serbia is comparable to other European countries (as a percent of GDP) but its outcomes are considerably poorer. There is evidence that significant savings could be achieved through the rationalization of the school network, particularly at the primary level, without reducing education quality. Serbia has too many teachers, given its present student population. As a result, many classes are inefficiently small.