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BELGRADE (Reuters) - Serbia's parliament passed a new law on privatisation on Saturday to accelerate the sale of loss-making state companies and to curb spending.

Backed by 165 of 170 lawmakers attending an extraordinary session of the 250-seat parliament, the law will also enable Serbia to receive a $250 million budget support loan from the World Bank.

Serbia's fiscal deficit is expected to rise to 8.3 percent of national output this year, exceeding the government's target of 7.1 percent. Public debt is seen topping 70 percent of gross domestic product.

Subsidies to state-owned companies and a lack of tax revenues from loss-making firms is costing the country 1 billion euros ($1.34 billion) a year, or nearly 3 percent of national output.

The government's top advisory body, the Fiscal Council, this week warned that any further financing of loss-making companies would "bring Serbia's finances to collapse".

Successive governments have been reluctant to cut subsidies to loss-making companies including the country's sole steel mill, gas company Srbijagas and drug maker Galenika, fearing job losses could cause social discontent.

The new privatisation law sets Dec. 31, 2015, as the deadline for privatising some 584 companies including 161 companies that are restructuring.

To speed up the procedure, it introduces debt write-offs for state-owned entities and enables the conversion of debt to equity.

Opposition parties have warned that the sales could leave many of the 90,000 workers affected without jobs as most of the firms are inefficient and uncompetitive.

"Between 20,000 and 50,000 people could lose jobs in the privatisation process," Janko Veselinovic, a member of the New Democratic Party, told the parliament.

The parliament also passed changes to Serbia's bankruptcy laws to speed up liquidation of indebted state companies.

The passage of both laws was a precondition set by the World Bank for the release of its loan to Serbia.

Serbia's economy is forecast to contract by 0.5 percent this year following devastating floods in May which caused 1.5 billion euros in damage.

The country's unemployment rate stood at 20 percent in the second quarter.

The government will present a detailed plan for fiscal consolidation in September when the parliament will vote on a revised 2014 budget.

But to reassure investors the European Union candidate country is looking to close a 3-year stand-by arrangement with the International Monetary Fund. The IMF said it will start negotiations with Serbia after the vote on a revised budget.

($1 = 0.7447 Euros)

(Reporting by Ivana Sekularac; editing by Jason Neely)

Reuters