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Nov 07, 2017 13:34 EEST
November 7 (SeeNews) - The International Monetary Fund (IMF) said on Tuesday it will make available an additional 119.4 million euro ($138.1 million) to Serbia upon completion of the final review of the country’s economic performance under the 2015 stand-by agreement.
The fresh funding will bring the total amount available to Serbia under the stand-by arrangement (SBA) to 1.05 billion euro, the IMF said in a statement.
The Serbian authorities have indicated that they do not intend to draw on the resources available under the arrangement. Following this review, the programme will conclude on February 23, 2018, the IMF said.
"The IMF mission held constructive discussions with the authorities and reached staff-level agreement on policies needed to complete the eighth review under the SBA. All end-September 2017 performance criteria have been met, most with significant margins, and implementation of structural benchmarks has continued, although with delays in some areas," the head of the IMF mission, James Roaf, said in the statement.
The agreement is subject to completion of key structural, fiscal, and financial policy actions, and approval by IMF management and executive board.
"Consideration by the Board is tentatively scheduled for late December."
The IMF mission noted that Serbia's strong economic performance continues. Notwithstanding a temporary slowdown caused mainly by the drought and electricity disruptions, underlying economic activity remains robust, supported by strong growth in exports, private consumption and investment. Labour market conditions have continued to improve, with new private sector jobs being created and a significant fall in unemployment, Roaf said.
"We project real GDP growth of 2% in 2017 and 3.5% in 2018. Inflation is projected to remain close to the centre of the NBS [central bank] target range. The monetary policy stance is appropriate given the low inflation outlook and exchange rate developments."
The mission agreed with the authorities on the key parameters of the 2018 budget. The priority is to preserve hard-won fiscal achievements, while supporting growth-enhancing initiatives, such as increasing public investment and reducing the tax burden on low-income workers.
Along with the agreed wage and pension increases, the 2018 fiscal deficit is projected at 0.7% of GDP – a level consistent with fiscal sustainability and further public debt reduction. "Remaining structural weaknesses in the public sector should be tackled by fully implementing the reform agenda. The financing of weak public entities through arrears to Srbijagas and electricity company EPS has been significantly reduced, reforms in railways have continued, and pharmaceutical company Galenika has been privatised. However, resolution of some other problem enterprises, especially in the petrochemical and mining sectors, is still pending."
Public administration reforms should also be accelerated to improve the quality of public services and reduce fiscal risks. The passage of secondary legislation for the new public wage system will be a key milestone in this regard, Roaf noted.
Substantial reform efforts are still needed to foster competition and reduce the regulatory and administrative burden on enterprises in order to create conditions for faster private sector growth and convergence to EU income levels, Roaf said.
In the financial sector, the resolution strategy for non-performing loans has continued to yield very good results, but more decisive action is needed in state-owned banks.
In February 2015, the IMF approved a 36-month, 1.2 billion euro SBA that aims to help Serbia restore public finances’ health, increase the stability and resilience of the financial sector and implement comprehensive structural reforms.
($ = 0.864576 euro)
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