Serbia is seeking to agree a new loan program with the International Monetary Fund next month, before the nation’s parliament adopts the 2013 budget.
Serbia needs the funds to lower the cost of borrowing as the cabinet of Prime Minister Ivica Dacic tries to avoid bankruptcy and foster growth after a second recession in three years. The country is also struggling with the highest unemployment rate in Europe of 25.5 percent.
“It is our ambition to have the IMF loan deal before the 2013 budget is adopted,” Deputy Finance Minister Vlajko Senic said in a news briefing in Belgrade today. “Ideally, that should happen in October.”
Serbia is host to an IMF fact-finding mission this week, which is assessing the country’s economy and fiscal position as well as changes to central bank law which established parliamentary control over the National Bank of Serbia.
The fact-finding mission has no mandate to negotiate a new loan program, Senic said. The country needs to prove it’s committed to improving its finances over the medium term before the IMF can be persuaded to return to Belgrade for new loan talks, he said.
The government is “open to discussing” either a loan to help with its budget or a precautionary loan program, he added. msg
The IMF suspended a $1.3 billion precautionary loan with Serbia in February on evidence it was slipping on agreed deficit and debt targets.
The economy is expected to contract by as much as one percentage point this year, while the budget deficit rose to 7.2 percent of gross domestic product at the end of June and public debt to 54.7 percent of GDP. The government wants to bring the deficit down to 4 percent of GDP next year.
Serbia’s fiscal rules limit the gap at 4.5 percent of GDP and debt at 45 percent of GDP.
Serbia also wants to slow the pace of public debt expansion in 2013 and start lowering it in 2014, Senic said.