IMF: Serbia to use arrangement for new jobs and BDP increase

“While it has weathered the financial crisis relatively well, Serbia faces a number of significant challenges: sluggish growth, serious fiscal imbalances, incomplete reforms, and natural disasters-an extreme winter and a drought in 2012, and devastating floods in 2014,” states the IMF Survey.

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“A new coalition government, which was appointed in April 2014, reaffirmed Serbia's path to EU accession, and even before signing a new EUR 1.2 billion Stand-By Arrangement with the IMF, already implemented some very difficult reforms that are needed to restore macroeconomic stability and achieve sustainable growth,” the IMF Survey states.

Commenting on the new programme which the IMF Executive Board granted to Serbia, Chief of the IMF Mission for Serbia Zuzana Murgasova said in an interview for the IMF Survey that there are three main pillars on which the programme rests, and these include restoration of the sustainability of public finances, increase of the stability and resilience of the financial sector and implementation of comprehensive structural reforms that will boost job creation and bring sustained high growth back.

Foto: Tanjug/Rade Prelić 

According to Murgasova, the first point envisaged in the programme is embodied in fiscal adjustments to stabilise public debt within the program period. The consolidation is largely based on curbing mandatory spending and reducing state aid to state-owned enterprises, she noted.

“Actually, some of the major measures, related to pensions and public sector wages, have already been introduced in 2014 or are included in the 2015 budget, highlighting how committed the Serbian authorities are to the program,” Murgasova said.

“Tightening on the fiscal side will allow for some relaxation on the monetary side. With the fiscal consolidation, the central bank will be able to reduce interest rates, fostering credit for the economy and the private sector to grow,” the IMF mission chief said.

“Second, the program aims to strengthen the financial sector. Serbian banks have weathered the crisis relatively well. However, the volume of bad debt (non-performing loans) has increased a lot. This is a significant challenge, but will be essential to get credit flowing again. When banks are clogged with too much debt that is not being paid, they can't provide new loans to the economy,” Murgasova said.

Foto: Tanjug/Rade Prelić

“The Serbian government is committed to designing and implementing a comprehensive strategy to deal with this problem. Also, reducing the use of foreign currencies (particularly euro) and increase the dinarisation of the economy is very important,” Murgasova said in the interview.

“The third leg of the program is to continue with structural reforms. They are essential to enhance Serbia's growth potential, and austerity is self-defeating without growth,” she stated.

According to Murgasova, there are three broad priorities which the Serbian government needs to implement over the medium term and these comprise job creation, improvement of the business environment and competitiveness and resolution and reform of state-owned enterprises.

(Telegraf.rs / Tanjug)