Serbia, IMF reach deal on new 30-month non-financial arrangement
An International Monetary Fund (IMF) mission reached a staff-level agreement on a 30-month non-financial arrangement with Serbia, the lender said.
An International Monetary Fund (IMF) mission reached a staff-level agreement on a 30-month non-financial arrangement with Serbia, the lender said on Wednesday.
In February, Serbia ended a three-year 1.2 billion euro deal with the IMF under which it undertook measures to trim public debt and budget gap, including cuts in public sector wages and pensions. It did not draw on any funds.
A new deal is designed to maintain macroeconomic and fiscal stability while supporting structural reforms in order to speed up Serbia's economic growth, make it more sustainable and to foster job creation and improve living standard, the IMF said.
The so-called Policy Coordination Instrument (PCI), drafted to provide advice and monitoring for countries that do not need financial support, is subject consideration by the lender's Executive Board, tentatively scheduled for mid-July, it added.
"Under these policies, Serbia's macroeconomic outlook remains strong," James Roaf, the IMF team leader was quoted as saying in a statement.
Serbia's economy grew 4.6 percent in the first quarter and growth is forecast to reach at least 3.5 percent this year, he said. Inflation is seen at around 2 percent by the end of 2018, supported by the appropriate central bank's monetary policy.
"Fiscal policy under the PCI aims at preserving the hard-won gains to keep public debt on a firm downward path while supporting stronger sustainable growth," said Roaf, adding that the lender expects another year of fiscal surplus in 2018.
"For 2019 onwards, the programme targets a small overall deficit, aiming to reduce public debt to below 50 percent of GDP..., while providing space for an increase in capital spending and some targeted reductions in the tax burden on businesses and labor," he said.
That would help accommodate the unwinding of crisis-era temporary pension cuts and the transition to a new public wage system while ensuring that pension and wage bills do not increase as shares of national output, said Roaf.
He said that employment and wage system reforms would be key for improving the efficiency of public services and containing current expenditure.