Serbia Needs to Agree on Fiscal Policy Goals for New IMF Loan

Serbia’s government needs to agree with the International Monetary Fund on policy adjustments in the coming weeks if it wants to start talks on a new loan program, the Washington-based lender said.

An accord is needed on a “credible fiscal adjustment package, which includes credible fiscal consolidation and structural reforms,” for discussions on a new credit to begin during an IMF mission to Belgrade in May, IMF resident representative Bogdan Lissovolik told reporters at a business forum in Kopaonik, Serbia, today.

“We don’t really have a fixed date but sometime in the next few weeks,” Lissovolik said. “We think there’s a good window of opportunity early in the mandate” of the government “to advance on the reform agenda.”

The Balkan nation of 7.3 million people, where one in four is formally out of work, is struggling with its second recession in three years. Prime Minister Ivica Dacic’s six-month-old coalition government is seeking to curb price increases and restart growth after the economy contracted an estimated 1.7 percent in 2012.

The IMF suspended a $1.3 billion precautionary loan with Serbia in February 2012 on evidence the previous government was slipping on deficit and debt targets. It told Serbia in November to cut debt without choking economic growth, citing an unsustainable fiscal gap, volatile inflation and high unemployment.

Dacic wants to negotiate a precautionary loan program as it assures investors the IMF approves of the government’s policies even though the country doesn’t intend to draw any of the funds available.

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