Serbia, IMF successfully wrap up fifth review of stand-by loan deal.

By bne IntelliNews September 2, 2010
Serbia and the IMF have completed the fifth review of the country's stand-by arrangement with the lender and have agreed to unfreeze public sector salaries and pensions as of early 2011, finance minister Diana Dragutinovic said. Under the agreement, the first adjustment to public sector salaries and pensions will be implemented in January 2011, when they will increase at a rate corresponding to the 2010 H2 CPI inflation. The second indexation will be carried out in April, when wages and pensions will rise with a rate equal to Q1 2011 CPI and half of the country's GDP growth at the time. In October, salaries and pension will be adjusted for H1 CPI. We recall that public sector wages and pensions remained frozen in the last two years, under the requirements of the IMF deal. We also note that under the initial deal, public sector wages and pensions were supposed to be unfrozen in mid 2011. The disbursement of the fifth installment from the IMF loan is conditioned on the adoption of a fiscal responsibility law, expected in the second half of September. Fiscal responsibility legislation is expected to enable better control over public spending and set ceilings for budget deficit and public debt. The finance minister noted that Serbia's budget deficit will not exceed this year's target of 4.8% of GDP, while for 2011 the ceiling is set at 4% of GDP. The head of the IMF mission Albert Jaeger said that the 2011 budget will be the focus of the next round of talks scheduled for October. He stressed that the country would have to comply with the 4% of GDP deficit target set for next year. As earlier reported, Serbia has so far withdrawn some EUR 1.45bn under the EUR 2.9bn stand-by arrangement with the IMF. The IMF Board of Directors will meet on September 27 to approve the disbursement of the next installment.

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