IMF Executive Board Completes Seventh and Final Review Under Stand-By Arrangement with Serbia and Approves €353.5 Disbursement

Press Release No. 11/125
April 8, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the seventh and final review of Serbia’s economic performance under the program supported by a Stand-By Arrangement (SBA). Completion of the review enables the immediate disbursement of SDR 319.595 million (about €353.5 million or US$509 million), although the authorities have indicated that they intend to purchase only SDR 46.7 million (about €51.6, US$74.4 million, or 10 percent of the country’s IMF quota), bringing total disbursements under the program to SDR 1.368 billion (about €1.5 billion or US$2.2 billion).

Serbia’s initial 15-month SBA was approved on January 16, 2009, in the amount of SDR 350.8 million (about €388 million, or US$558.7 million). On May 15, 2009, the arrangement was extended by one year and augmented to SDR 2.62 billion (about €2.9 billion, or US$4.2 billion) to support the government's economic program amid a sharper than expected impact from the global financial crisis (see Press Releases No. 09/12 and No. 09/169). The arrangement expires on April 15, 2011. Serbia joined the IMF in December 1992 and has a Fund quota of SDR 467.70 million.

Following the Executive Board’s discussion of Serbia, IMF Managing Director Dominique Strauss-Kahn, made the following statement:

“Serbia’s satisfactory performance under its economic program supported by the Fund’s Stand-by arrangement contributed to reducing vulnerabilities and helped avert a financial meltdown during the global crisis. The growth outlook is favorable, although inflationary pressures are rising. Serbia is making progress toward a more balanced economic growth model, but the adjustment is proving difficult, as indicated by strong pressures to hike public wages and significant private sector job losses.

“Politically difficult reforms will be needed to entrench more sustainable growth. The outstanding reform agenda includes addressing the oversized public sector, following up on the recent pension reform, rationalizing the public enterprises, and improving the business environment.

“The authorities have so far successfully managed pressures to relax public spending. Keeping public finances under control and complying with the fiscal responsibility legislation is essential to support balanced-growth.

“Although there is still excess capacity in the economy, inflation has surged as a result of higher food prices and the pass-through of the exchange rate depreciation. The National Bank of Serbia has decisively tightened monetary policy, keeping inflation expectations from rising significantly.

“Serbia’s banking system remains liquid and well capitalized. These buffers are adequate to withstand the much-needed restructuring of the corporate sector. To complement recent efforts to facilitate corporate restructuring, the authorities should finalize the new framework on the voluntary out-of-court financial restructuring and a corresponding package of tax and provisioning incentives.”



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