Negotiations between Serbia and IMF begin in Belgrade

New negotiations between Serbian officials and the International Monetary Fund (IMF) mission have started in Belgrade.

The talks concern the fourth revision of the stand-by agreement signed between Serbia and the international financial institution.

While some ministers have said that they were optimistic regarding the talks, economists warned that the request for unfreezing wages in the public sector and pensions this year was inrealistic.

Some of the key topics in the negotiations will be reforms of the taxation system, a decrease in state spending through making state employees redundant, tax policy reforms and the request of Economy Minister Mlađan Dinkić to increase wages and pensions by the end of the year.

The room to maneuver outside of the already agreed upon guidelines is small, and experts believe that the request for unfreezing wages and pensions will represent the most difficult part of the talks.

Finance Ministry State Secretary Slobodan Ilić said that it is most important to keep the budget deficit at the level that was agreed upon.

“We have to begin with rationalizations of another kind. One of the rationalizations is related to the number of people working in the administration. The other is the reform of the pension system,” he said.

Ilić said that a reform process exists in Serbia for education and health sectors in order to achieve savings goals, which can be achieved with a better process of public purchases.

He added that a lot has been done, despite the fact that Serbia is running late with its rationalization of the state administration.

“It is very important to understand that the basis of the realization of such obligations from our arrangements with the IMF has already been completed. The systemization of jobs has been adopted, because that is the basis for any other kind of activity,” he said.

Economist Ivan Nikolić believes that it is “obvious that Serbia is not well prepared for the negotiations”.

He said that there has not been a cut in state spending through redundancies in the administration.

“Some people have lost their jobs. Some are in the process of losing their jobs, but it seems that the desired savings from the wages were not achieved and it is still not seen in the budget,” Nikolić said.

He added that the plans for pension and tax reform have not been completed yet.

“I do not know if the government will be able to convince the IMF that we have a visible amount of recovery in economic activity. According to the statistical indicators, there is no valid evidence that there has been any significant recovery,” Nikolić said.

The IMF approved loan in a stand-by agreement with Serbia worth EUR 2.9bn on May 15, 2009. Serbia has withdrawn EUR 1.3bn thus far.

The technical mission of the IMF arrived in Serbia on May 13 and will remain there until May 26 in order to see if the Serbian government is implementing the savings plan that was agreed on.