Office building in Belgrade, Serbia, where banking sector's capital, liquidity buffers should help weather financial headwinds (photo: Marko Djurica/Reuters)
GLOBAL FINANCIAL CRISIS
The IMF said that in view of Serbia's comfortable international reserve position and continued access to external financing, the arrangement is being considered under regular, not exceptional, procedures and access limits. The Serbian authorities do not intend to draw on the resources made available under the 15-month Stand-By Arrangement unless the need arises.
"The global financial turmoil has begun to spill over to Serbia, and this abrupt shift in the international environment is likely to slow down credit flows and economic activity across the region," said IMF Managing Director Dominique Strauss-Kahn. "While the banking sector's capital and liquidity buffers are substantial and should help weather the financial headwinds, strong policies will be important to maintain investor and market confidence."
Fiscal restraint
The IMF said that Serbian authorities have designed a strong and comprehensive program. The proposed arrangement is intended to support the policies aimed at maintaining macroeconomic and financial stability. These involve fiscal restraint, with a deficit limited to 1½ percent of GDP next year; monetary policy focused on containing inflation; financial sector measures to preempt and, if necessary, react to possible threats to stability; and structural reforms to boost the economy's growth and export potential.
The IMF has already announced loan agreements of $15.7 billion for Hungary and $16.4 billion for Ukraine as part of efforts to counter the impact of global financial turmoil on emerging markets in Eastern Europe.
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