Serbia Seeks Swift IMF Loan Deal to Lure Investors, Premier Says

Serbia is aiming to reach an agreement on a loan with the International Monetary Fund by the end of the year to improve the country’s image with potential investors, Prime Minister Aleksandar Vucic said.

The Washington-based fund said yesterday it’s sending a mission to Serbia next month to assess the economy and negotiate a new loan program with the nation’s leaders. The country seeks a “precautionary” loan for three or four years, the size of which has yet to be determined at the talks, Vucic said in an interview in London yesterday.

“It is very important for our country because it will secure a stable environment for all possible investors and people will know that we are committed and very dedicated in our process of reforming the country,” Vucic said. “We are the first country in southeastern Europe to have launched consolidation measures with no pressure from outside. We have a lot of support from the IMF, World Bank and other financial institutions.”

Vucic’s six-month-old cabinet is seeking to lure investment to kickstart a recovery as the biggest former Yugoslav country grapples with its third recession since 2009. The nation, which started talks to join the European Union in January, slipped to 91st from 77th among 189 countries in the World Bank’s Ease of Doing Business report published yesterday.

Vucic this month urged lawmakers to approve spending cuts to rein in a widening budget deficit and win the IMF’s financial backing. The lender suspended a precautionary loan program in February 2012, when Serbia slipped on its fiscal performance before a general election that year.

Budget Shortfall

The 2014 shortfall is projected to be 7.6 percent of gross domestic product by the country’s Fiscal Council, which the government pledged to narrow by 700 million euros ($892 million) or about 2 percentage points of GDP.

Serbia plans to lower the budget gap to about 2 percent to 2.5 percent and reduce public debt to “sustainable levels” by 2017, Finance Minister Dusan Vujovic said yesterday in London.

The country has a fiscal deficit problem and no liquidity issues and it has access to international capital markets for borrowing, Vucic said. Serbia held four Eurobond sales between September 2012 and November 2013, raising $4.25 billion.

The government has recently unveiled plans to raise 1.25 billion euros in a Eurobond sale, which Vujovic said Oct. 22 will happen before the end of 2014. The premier said yesterday his assumption is it will take place in the first quarter of next year.

The yield on Serbian dollar bonds maturing in 2021 fell one basis point, or 0.01 percentage point, to 4.83 percent, by 5:25 p.m. in Belgrade, according to data compiled by Bloomberg.

The economy will contract 0.3 percent or 0.4 percent in 2014, before expanding 1.2 percent next year, according to the government. Growth will accelerate to 1.6 percent in 2016, it estimates.

Vucic reiterated the country seeks to join the EU by 2020.

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