Serbia, IMF in fresh round of talks

Official negotiations between Serbia and the International Monetary Fund (IMF) began today in Belgrade.

The talks concern the EUR 2.9bn loan and the country’s budget for 2010.

These are the first meetings concerning the second and third revision of the loan arrangement, and see participation from IMF delegation members and Prime Minister Mirko Cvetković and Finance Minister Diana Dragutinović.

A fiscal deficit totaling four percent of the GDP represents a realistic basis for the drafting of a bill on the 2010 budget, it was concluded as Cvetković and Dragutinović met with IMF mission to Serbia head Albert Jaeger.

Cvetković underlined that the main goals in the field of public finances were a further reduction of the public expenditure participation in the GDP, and reaching a sustainable level of public debt, the government’s press service said in a statement.

Ahead of the start of the talks today, reports said that the IMF will look at whether the state is “behaving rationally and responsibly in the financial sense”.

Belgrade will offer a freeze on salaries and pensions in 2010, cuts in the number of those employed by the state administration, savings in public procurement and better control of local administration expenses.

Ministry of Finance State Secretary Slobodan Ilić says the government “prepared well this time”, and is an optimist as to the outcome of the meetings.

“I expect that the main talks will focus on budget projections for 2010, the size of the budget deficit which we projected at a level of four percent, a detailed explanation of the planned savings which are related to the position of maintaining wage and pension levels for 2010, and savings based on decreasing the purchase of products and services. Then there will be talk of savings that will be related to the rationalization of the public administration and all other savings which the government projected with the goal of decreasing the burden on the citizens and industry,” Ilić told B92.

He said that the government will stick to its stance that there will be no increase in taxes next year.

However, other than the reforms of the administration next year, there will also be reforms in other important sectors which should also save budget money, he said.

“There are reforms to be made in the pension, health and education systems. As far as covering the budget deficit through standard sources for covering it, this will include income from privatization, various forms of loans both domestic and from the international market, as well as various macro-financial assistance which we expect from international financial institutions,” he said.

Ahead of the meetings today, European Economic Institute Director Dragomir Janković did not think the proposed government measures would suffice.

“My personal, and the appraisal of the institute is that these measures are not implementable or sufficient to produce good effects for the lowering of the budget deficit in a short time,” he told B92 TV.

If approved, the second and third installment could bring Serbia EUR 1.4bn by the end of next year, along with other “indirect benefits”.

“That would mean that Serbia passed rigorous IMF demands, that it is microeconomically stable, and that foreign investors can invest here,” said Janković.

Since 2000, the international financial institution approved over USD 6.2bn to Serbia in four loan arrangements.

Three stand-by deals have been paid off, two within, and the third ahead of deadline, during 2006 and 2007.

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