Nov. 6 (Bloomberg) -- The International Monetary Fund won’t release the next installment of Serbia’s bailout loan until the government presents its 2010 budget draft to lawmakers, said Bogdan Lissovolik, the IMF representative to the Balkan nation.

Serbia’s government needs to submit the draft to parliament and start an overhaul of the country’s pension system and public administration, freeze pensions and wages in 2010 to allow for the disbursement of 650 million euros ($968 million), Lissovolik told Bloomberg News in an interview today.

“We need to see the budget draft and get approval from the IMF’s managing board in order to complete the second review,” he said in an interview today.

Serbia is going through its first recession since the 1999 NATO bombing, aimed at forcing the country’s troops to withdraw from Kosovo, destroyed most of its infrastructure. With investment drying up because of the global financial crisis and tax revenue waning, the government turned to the IMF for a 3 billion-euro bailout loan.

Finance Minister Diana Dragutinovic said on Nov. 4 that the government will submit the draft to parliament “in the next two or three weeks.” Lissovolik said he sees risks to the changes mandated by the IMF.

“The implementation side of the laws is the country’s biggest problem,” he said. Another risk is the political situation, “but our strategy is to do what is good for the country. It is the task of policy makers to secure the political acceptance of the measures in the country.”

Serbia has also agreed to an additional $200 million loan from the World Bank and is in talks with Russia on another $1 billion loan, $200 million of which would be used to cover the budget shortfall.

On Oct. 8, the European Commission said it plans to lend as much as 200 million euros to Serbia, which Lissovolik said will depend on the approval of the IMF arrangement.

To contact the reporter on this story: Aleksandra Nenadovic in Belgrade at anenadovic@bloomberg.net

Last Updated: November 6, 2009 10:52 EST