The new arrangement with the International Monetary Fund is a guarantee of macroeconomic stability and a signal to foreign investors to invest in the local economy. Serbia needs an arrangement with the Fund, the state delegation believes, and this was discussed last weekend during the regular spring session of the World Bank and the IMF. More in our regular feature Economic Review prepared by Zorica Mijuskovic.
Negotiations with the IMF should continue after the election, even before the formation of new government, with technical talks, representatives of the Serbian delegation believe. This would be primarily related to the new budget projections and macroeconomic developments, given that the expectations for growth this year have been lowered. As head of the Serbian delegation and State Secretary in the Ministry of Finance Goran Radosavljevic explained, due to the economic slowdown in the eurozone and the EU, the IMF revised its growth forecast for Serbia to 0.5% by year's end.
Consensus was reached on the budget revision, which will certainly remain an issue to be tackled by the new government. This includes the selection of measures to strengthen fiscal policy and ensure that Serbia maintains the planned budget deficit up to 4.5% of the GDP, with the public debt up to 45% of the GDP, Radosavljevic said. As the Serbian delegation in Washington has been informed, the World Bank will provide the assistance to reforms in the amount of 300 million dollars. The first tranche of 100 million dollars should be received during the summer, with another 200 million dollars to follow in November for the reform of the sector of public enterprises.
In addition to meetings with the IMF and the World Bank, the Serbian delegation in Washington had talks with numerous investors in the United States. The lack of the arrangement with this financial institution would be a deterioration of the image of Serbia as a country that manages to maintain revenues and expenditures under control, and it would certainly affect the price growth, which finances the debt and interests, said Governor Dejan Soskic. It is therefore necessary for Serbia to have a new government and parliament as soon as possible, as it is important to change certain regulations in order to intensify the reform process.
Serbian experts also support the continuation of negotiations with the IMF, as part of the budget revision. Professor at the Belgrade School of Economics Jurij Bajec assessed as encouraging that 0.5% increase has been projected for Serbia’s GDP this year. In 2013 already, the increase should be 3%, inflation should grow by 4.5%, with a declining inflationary trend. The evaluation of the most important international lender on the 3% growth of the Serbian economy in 2013, he said, opens a perspective, which means that during its first year in office, the new government will have to make bold moves and get the local economy in order.
The last arrangement with the IMF, worth around 1.1 billion euros, was "frozen" in mid-February 2012, because the Serbian Government’s budget for 2012 envisaged fiscal deficit by at least 1% of the GDP higher than it was agreed during the arrangement audit in late 2011. The IMF then announced that they expected this year’s fiscal deficit to reach at least 5.25% instead of 4.25% of the GDP as envisaged by the fiscal program of November last year.