Serbia Pledges to Cut Budget Deficit

Belgrade has acted to restore IMF confidence by adopting a draft budget review and a package of anti-crisis measures.Serbia’s Socialist-led government has adopted a 2012 draft budget review and 12 laws regulating public finance, designed to avert financial collapse.

The measures aim to reduce Serbia’s consolidated budget deficit from 7.1 per cent to 6.7 per cent by the end of the year.According to the revised budget, non-food VAT will rise from 18 to 20 per cent while taxes on profits will rise from 10 to 12 per cent next year, the government said.

Public sector wages and pensions will rise by 2 per cent in October and by the same amount again in April 2013.

The moves are aimed at repairing damaged relations with the IMF after a row over broken spending limits and the central bank’s independence.

On the same day, an IMF mission opened the first of four days of talks with Serbian officials.

The Serbian delegation is headed by National Bank governor Jorgovanka Tabakovic while the IMF mission is led by Zuzana Murgasova.

The talks during the mission’s visit to Belgrade will focus on analysis of the macroeconomic situation, Serbia’s economic outlook and recent changes to the law on the National Bank.

Bogdan Lissovolik, IMF Resident Representative in Serbia, said ahead of the start of the talks that the mission will discuss the IMF’s concerns about the recent changes to the law on the Bank that have undermined its autonomy.

The changes led Dejan Soskic, the former governor of the bank, to resign in August.

After these visits, the IMF will visit again late in 2012 ahead of planning the 2013 budget.

“We are fully ready for cooperation and certain that an agreement with the IMF may be expected before adoption of the 2013 budget,” Vlajko Senic, from the Ministry of Finance and Economy, said.