Press Release No. 17/515

IMF Executive Board Completes the Eighth Review of Serbia’s Stand-By Arrangement

December 20, 2017

• Program remains on track and is supporting improved confidence, rising investment, and stronger growth.
• Authorities implemented ambitious fiscal adjustment, which has placed public debt on a rapid downward trajectory.
• Further progress with implementing the structural reform agenda is critical to secure sustainable growth and a faster convergence.

The Executive Board of the International Monetary Fund (IMF) on December 20, 2017 completed the eighth review of Serbia’s economic performance under the Stand-By Arrangement (SBA). The completion of the review will make available the cumulative amount of SDR 880.835 million (about €1.05 billion). The Serbian authorities have indicated their intention to continue treating the arrangement as precautionary.

The Executive Board approved the 36-month, SDR 935.4 million (about €1.2 billion at the time of approval) SBA for Serbia on February 23, 2015 (see Press Release No. 15/67). The arrangement will expire on February 22, 2018.

Following the Executive Board’s decision, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:

“Serbia has made significant progress under the Fund-supported economic program. Confidence in the economy has improved, public debt is declining rapidly, external position is robust, and investment and growth are stronger. In addition, labor market conditions continue to improve. Significant progress has also been made in implementing the structural reform agenda.

“Continued prudent policies and implementation of structural reforms, especially deeper institutional reforms, are critical to secure sustainable growth and a faster convergence with Western European living standards.

“The authorities have implemented an ambitious fiscal adjustment, which has placed public debt on a rapid downward trajectory. The 2018 budget allows for some employment-friendly tax reductions, while providing fiscal space for needed capital spending. Reforms should continue to achieve better public infrastructure, improve public administration and delivery of public services, and achieve more effective social protection.

“Monetary policy has succeeded in keeping inflation under firm control and is supporting the economic recovery. The current state-contingent approach to monetary policy is appropriate considering domestic and external uncertainties. The exchange rate flexibility demonstrated recently is welcome, with some overall appreciation reflecting Serbia’s improved fundamentals and market conditions.

“Financial sector reforms under the program have strengthened banks’ resilience, and put them in a much stronger position to support the economy. Efforts to reduce NPLs are yielding good results and need to continue, while reforms of state-owned financial institutions need to be accelerated.

“The significant progress with structural reforms has strengthened Serbia’s growth potential and job creation, and reduced fiscal risks. Nevertheless, substantial work remains in SOE governance, management, and investment as well as public administration. Serbia’s business environment has improved due to both macroeconomic stability and a better regulatory environment. Further efforts are needed to address problem areas for businesses, including taxes and parafiscal charges, and delays and uncertainty in the judicial system.

“The approaching completion of the program will mark a successful macroeconomic adjustment and a significant strengthening of Serbia’s economic capacity.”