World Bank, Serbia Agree on $500 Mln Loan To Back 2009/2010 Budgets

A $200 million portion of the loan will be used in support of Serbia’s 2009 budget while the remaining $300 million will be used next year, Dragutinovic told a news conference.

The World Bank financing is now pending parliamentary approval.

Serbia qualified for the funds due to the successful completion earlier this month of a review by the International Monetary Fund (IMF) of the country’s performance under its 3.0 billion euro funding deal with the international lender as well as due to a tighter public spending control and a sustainable monetary policy. 

Serbia has agreed to freeze pensions and wages in the public sector in 2010, where the biggest savings will come from, and has committed to begin the overhaul of the public sector under its two-year stand-by deal with the IMF.

Public spending will be cut to 41.4% of the projected gross domestic product in 2010 from just above 43% that has been the case since 2001.

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.

The World Bank’s lending purse for Serbia totals $900 million between July 2007 and June 2011, the head of the World Bank Office for Serbia, Simon Gray, has said. 

Serbia will be repaying the loan over 20 years at an annual interest rate of 1.0%, Dragutinovic said.

($=0.6702 euro)