Press Release: IMF Reaches Staff-Level Agreement on First Review of Precautionary Stand-By Arrangement with Serbia

November 16, 2011

Press Release No.11/414
November 16, 2011

An International Monetary Fund (IMF) mission, led by Mark Allen, visited Serbia during November 3-15, 2011, to conduct discussions on the first review of the precautionary Stand-By Arrangement (SBA) with the IMF.  At the conclusion of the mission, Mr. Allen issued the following statement in Belgrade:

“An IMF mission and the Serbian authorities have reached staff-level agreement, subject to approval by IMF Management and the Executive Board, on policies needed to complete the first review under the precautionary SBA. We expect the request to be considered by the Executive Board in late December. While the completion of the review will make some €190 million available to the country, the Serbian authorities have indicated that they do not intend to draw on the resources made available under the arrangement unless the need arises.

“Real GDP growth is still expected at 2 percent in 2011, but as a consequence of the crisis in the euro area it is set to slow to 1½ percent in 2012, with risks on the downside. On the positive side, inflation has fallen into single digits, and is on track to re-enter the National Bank of Serbia tolerance band in early 2012.

“The discussions concentrated on budgetary policies. For 2011, the fiscal deficit target remains at 4½ percent of GDP, but additional efforts are needed for it to be achieved.“For 2012, a deficit target of 4¼ percent of GDP was agreed. This is below the level prescribed by the fiscal deficit rule, which would be 4½ percent of GDP given the 2012 downward growth forecast revision. This additional adjustment is necessary as a first step in addressing the rise in the public debt ratio, which is already close to the legal ceiling of 45 percent of GDP. To achieve the 2012 deficit target, the authorities intend to implement several measures amounting to ¾ percent of GDP, mostly on the revenue side but also including cuts in goods and services spending, in addition to steps agreed in August. The submission of the 2012 budget, in line with the SBA, will be a prior action for the first review.

“The mission assessed the authorities’ structural reform agenda, and discussed further steps. It additionally held talks on recent initiatives on public private partnerships and the development bank, and made recommendations to control their fiscal risks.”


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