IMF and Serbia agree next tranche of standby loan

Sep 1, 2010, 11:44 GMT

Belgrade - Serbia has achieved the targets for the economic programme it agreed on with the International Monetary Fund (IMF) and will receive the next tranche of a 2.9-billion-euro (3.7 billion dollars) standby credit, officials said Wednesday in Belgrade.

The economic programme is 'on track,' IMF mission chief Albert Jaeger said at a press conference. He said Serbia only needed to submit a draft law on fiscal responsibility to parliament before the IMF managing board meets on September 27.

That move would unfreeze the next, 380-million-euro tranche of the credit, Jaeger said. Over the past 10 days he headed a regular quarterly mission that reviewed Serbian economic policies to ensure they were in line with the agreed programme.

Belgrade and the IMF agreed on a 15-month, 420-million-dollar credit line in January 2009, but extended it by a year and increased it to 2.9 billion euros four months later as effects of the economic crisis began to hit the country hard.

The funds are intended to bring about macroeconomic stability in Serbia, which weakened amid dwindling foreign investments and an unsustainable level of spending.

To get the IMF funds, Serbia had to bring spending under control and keep the budget deficit below 4.8 per cent of gross domestic product, while cutting thousands of public servant jobs and freezing salaries paid from the budget in 2010.

IMF is now allowing Serbian politicians, who are hard-pressed by labour unions threatening massive strikes, to plan three public wage hikes in 2011.