Serbia Completes Successful IMF Program
IMF News, February 22, 2018
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- Authors: Arrangement Reforming
- Published: February 22, 2018
Program outcome and overview
- Serbia exits a $1.32 billion three-year program with the IMF on February 22, after outperforming several of its goals.
- The IMF characterizes the program as having “done much better than expected, overperforming many of its macroeconomic goals.” — James Roaf, head of the IMF’s Serbia team.
- Concluding the program is described as “only the first step” toward building a strong and vibrant economy able to compete globally.
Economic turnaround and recent performance
- In 2014 Serbia’s economy was in serious trouble following the 2008 global financial crisis: stagnation, weak public institutions, collapsing tax receipts, and overspending by government and state-owned enterprises led to a rapid buildup of public debt.
- Authorities adopted an ambitious program of fiscal adjustment, financial sector strengthening, and broad-based economic reforms; the IMF provided economic advice, monitoring, and precautionary financing.
- After three years under the program:
- The fiscal accounts moved from having the second-largest deficit in Europe in 2014 to boasting a surplus in 2017.
- Growth has returned, coupled with rising investment and employment.
- Economic confidence has improved with stronger investment both from foreign and domestic sources.
- Unemployment is near historic lows, and falling.
- Banks are solid, and nonperforming loans are now below their precrisis levels.
Remaining challenges and priority reforms
- The IMF emphasizes the need to deepen reforms post-program to reach Serbia’s full potential and to prevent the exodus of skilled workers to Western Europe.
- Reform institutions and public services:
- Strengthen institutions to support private-sector-led growth.
- Modernize tax administration and public services such as education and health.
- Improve efficiency of public services to enhance social protection.
- Develop financial markets and promote broader use of the Serbian dinar instead of the euro.
- Increase labor market participation—especially of women—and reduce informality.
- Implement wide-ranging reforms to address the large gray economy.
- Overhaul state-owned enterprises:
- Noted successes: restructuring of the railway company, improved debt collection in main electricity and gas companies, privatization of Smederevo steelworks.
- Remaining state-owned enterprises in need of reform or resolution include:
- Resavica coal mine
- RTB Bor copper complex
- Petrohemija
- MSK
- Azotara
- Several state-owned financial institutions also need reform or privatization, including BPS and Komercijalna banks and Dunav insurance company.
- Improve the business climate:
- Progress has attracted more investors due to better economic stability and stronger regulation.
- Constraints that still limit business investment and expansion:
- Tax and regulatory systems
- Multiple fees and charges
- Delays and uncertainty in the judicial system
- Build better infrastructure:
- Upgrading road, telecommunications, and energy networks is essential to propel Serbia toward a standard of living that rivals that of Western Europe.
Serbia Completes Successful IMF Program — February 22, 2018, International Monetary Fund
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References
- https://www.imf.org/en/News/country-focus
- PRESS CENTER
- IMF report
- Stand-By Arrangement
- Reforming the Judiciary in Central, Eastern, and Southeastern Europe
- Central, Eastern, and Southeastern Europe: Harnessing the Power of Good Governance (blog)
- Public Infrastructure in Western Balkans: A Highway to Higher Income
- Serbia’s Economic Program Aims to Support Growth and Job Creation (2015)
- Serbia and the IMF
- https://www.imf.org/en/home