Serbia Accepts IMF Terms, Paving Way for Loan Tranche
The International Monetary Fund and Serbia reached a “staff level agreement” after the government in Belgrade committed to meeting deficit and other fiscal targets under the 2011 budget, paving the way for the disbursement of the next loan tranche.
The agreement needs to be approved by the IMF board of directors, the lender said in a statement today. Serbia pledged to cut its 2011 budget gap to 4.1 percent of gross domestic product from 4.8 percent this year, freeze subsidies at 2010 levels and allow a modest rise in public wages and pensions.
The agreement comes almost a month after an IMF mission left Belgrade without completing the sixth quarterly review, leaving the government time to work out how to curb spending and keep the 2011 gap within 140 billion dinars ($1.78 billion).
Finance Minister Diana Dragutinovic said yesterday the draft 2011 budget would be adopted and sent to parliament by Dec. 15.
Serbia is emerging from its worst recession in a decade and the government is trying to reduce spending and boost tax collection without cutting too many social benefits.
The government also needs to return to lawmakers a pension law that gradually reforms the existing pay-as-you-go system to a more sustainable one.
The government and trade unions agreed earlier today that the changes in the retirement age for women will be delayed by two years, to 2013, and the lowest pension will be set at 27 percent of an average wage, the percentage approved by the IMF.
To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net
To contact the editor responsible for this story: Alan Crosby at acrosby1@bloomberg.net
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