IMF, Serbia agree on fourth loan revision

Representatives of Serbian government and the International Monetary Fund, IMF, have reached agreement on the fourth review of the country’s stand-by arrangement, which will enable Serbia to draw down €380 million.

Addressing reporters on Wednesday, Serbian Minister of Finance Diana Dragutinovic said that due to slowed economic growth in Serbia, it was agreed to increase the budget deficit caused by a lack of public revenue.

She went on to say that the slow economic growth saw the projected figure for the rise in GDP go from two to 1.5 per cent for this year, and from four to three per cent for 2011.

It was also agreed that salaries in the public sector and pensions would remain frozen this year but that 6.5 billion dinars would be set aside for the payment of the most vulnerable categories of the population – including within the pensioners category and employees in the public sector, as well as poor municipalities. Overdue agricultural pensions will also be paid, the minister said.

The IMF delegation arrived in Belgrade on May 11 to hold talks with the Serbian government on the fourth review of the country’s stand-by arrangement.

With the standby agreement, which the IMF granted on May 15, 2009, Serbia approved a loan of €2.87 billion for the strengthening of its foreign currency reserves. This April, the IMF delegation allowed €180 million of its loan to Serbia to be disbursed.

Albert Jaeger, the head of the IMF mission, told reporters that 2010 and 2011 would be two difficult years for Serbians due to slow growth and slow economic recovery, and that the country must reduce public expenditure and strengthen fiscal discipline in order to withstand the slow growth.

He added that the government is supposed to draft laws on the pension system and on fiscal discipline by the end of the year.

Speaking about the dinar exchange rate Jaeger said that the “floating” exchange rate helped Serbia to fight the negative effects of the global crisis and to stimulate exports from the country, “even though everyone in Serbia was not satisfied with the fall of the national currency.”