Serbia Can Hope for up to 650 Mln Euro in IMF Support Next Month

"Given the high level of reserves and the sharp fall in the current account deficit, the authorities may well request a yet-smaller disbursement," the IMF resident representative in Serbia, Bogdan Lissovolik, told SeeNews in a statement.

An IMF mission led by Albert Jaeger on Wednesday completed a two-week visit to Belgrade designed to review Serbia's economic performance under the 3.0 billion euro stand-by funding arrangement signed in March. Serbia withdrew the first tranche of the stand-by facility worth 788 million euro in May. 

The exact amount to be disbursed would depend on an updated assessment of Serbia's external financing need, Lissovolik said, adding that the issue of using the funds from the stand-by loan for supporting Serbia's budget was not discussed during the visit. This was due in part to the fact that "it was clear that here was sufficient financing of the fiscal deficit through non-inflationary sources without recourse to the IMF funds."

"Serbia could qualify for financial support from the IMF in the second half of December, when the IMF Executive Board meeting is expected to be held," the statement said.

Serbia will freeze pensions and wages in the public sector in 2010, where the biggest savings will come from, Finance Minister Diana Dragutinovic told a news conference wrapping up the IMF review mission on Wednesday. Public spending will be cut to 41.4% of the projected GDP in 2010 from just above 43% that has been the case since 2001.

“Another thing that was agreed on was the start of the overhaul of the public sector. We are an ageing nation. The number of retired people is growing faster than the workforce,” Dragutinovic said.

In its report on Serbia’s public spending released in September, the World Bank said pensions account for the biggest chunk of the country’s public outlays at around one-third.

“This will not be a short process. The full effects of this measure will be felt only in 2020,”  Dragutinovic added.

The government plans to raise 655 billion dinars ($1.03 billion/693.7 million euro) in budget revenue next year. Spending is set at 760 billion dinars, Dragutinovic said.

The IMF has revised its forecast for the contraction of Serbia's economy in the current year to 3.0% from 4.0% projected earlier, Albert Jaeger told the same news conference.

“I think we have seen some improvements given the very large shock that hit the Serbian economy,” Jaeger said.  Serbia and the IMF agreed last month that the government can run a budget deficit equivalent to 4.0% of the GDP next year, down from 4.5% agreed for this year.

The stand-by arrangement has helped Serbia ease financial tensions, the output decline has been contained and inflation is falling, Jaeger said.

Serbia's current account deficit fell to 1.15 billion euro through August from 4.05 billion euro a year earlier, preliminary central bank figures showed last month. The country's September foreign exchange reserves rose by 1.0% month-on-month to 10.683 billion euro.

The IMF will hold the next review of Serbia's economic performance in February.

(1 euro=94.4221 Serbian dinars)