July 19 (SeeNews) - The International Monetary Fund (IMF) said its executive board approved a new economic reform programme for Serbia that will build on the precautionary stand-by arrangement successfully completed in February 2018.
The 30-month Policy Coordination Instrument-supported programme aims at maintaining macroeconomic and financial stability and advancing an ambitious structural and institutional reform agenda to foster rapid and inclusive growth, job creation and improved living standards in Serbia, the IMF said in a statement late on Wednesday.
Programme reviews will take place on a semi-annual fixed schedule. While the PCI involves no use of IMF financial resources, successful completion of programme reviews will help signal Serbia’s commitment to continued strong macroeconomic policies and structural reforms, the IMF said.
"Serbia has chosen to cement the success of its 2015-18 precautionary stand-by arrangement with a new economic reform programme focused on strengthening institutions and improving competitiveness for faster growth, which is critical to secure sustainable growth and faster convergence with EU living standards," IMF's deputy managing director and acting chair Tao Zhang said in the statement.
The programme maintains a strong fiscal position and foresees a continued decline in public debt, while also accommodating growth-enhancing measures. Increased public investment would likely deliver the strongest growth dividend, especially as Serbia continues to improve the selection, appraisal, and preparation of infrastructure projects. Targeted tax measures can also improve incentives for investment and employment and reduce informality, Zhang noted.
"Monetary policy under the inflation targeting framework is reducing inflation and inflation expectations, while also supporting economic activity. With still elevated levels of euroization, full implementation of an updated dinarisation strategy, including better agency coordination and allowing more short-term exchange rate flexibility, will strengthen monetary policy transmission and market development," he added.
Efforts to reduce non-performing loans (NPLs) are yielding good results, but greater attention is needed to resolve bad assets of public financial institutions, including the development agencies and the deposit insurance agency, Zhang noted.
Structural and institutional reforms will gradually strengthen Serbia’s potential growth, helping to prepare the country for EU accession. Priorities supported by the program include strengthened tax administration and public investment management, an improved business climate, reduced informality, and a recasting of the role of the state away from direct participation in the economy towards supporting a full market economy, Zhang noted.
In February, Serbia exited a successful $1.32 billion (1.14 billion euro) three-year stand-by programme with the IMF that overperformed many of its macroeconomic goals.
($ = 0.861059 euro)