IMF approves final review of SBA with Serbia.

By bne IntelliNews April 11, 2011
The executive board of the International Monetary Fund (IMF) has completed the final review of Serbia's economic performance under the stand-by loan arrangement (SBA) with the fund, the IMF said in a statement on its website. Completion of the seventh review enables the immediate disbursement of EUR 353.5mn. However, the Serbian government said it would draw only EUR 51.6mn. Thus, the total disbursement would stand at EUR 1.5bn, the statement read. Following the executive board's discussion, IMF managing director Dominique Strauss-Kahn said that Serbia performed adequately under the IMF program, which has helped the country reduce vulnerabilities and prevent a financial meltdown during the economic crisis. Strauss-Kahn added that the growth outlook of the country is improving, but warned over rising inflation. The IMF official also noted that more politically difficult reforms will be required to ensure sustainable growth, including reduction of the public sector, continuation of pension system reforms, rationalization of public companies and business environment improvement. The authorities have so far successfully defied pressures to relax public spending, the IMF official said, adding that keeping public finances under control and complying with the fiscal responsibility legislation was crucial to ensure balanced growth. IntelliNews comment : Serbia's initial EUR 388mn worth 15-month SBA was approved in early 2009, but was later on extended by one year and increased to EUR 2.9bn, as the effects of the global crisis on Serbia turned more severe than initially expected. The arrangement with the IMF eased Serbia's external vulnerabilities and provided an anchor for foreign investors. Government officials earlier said that Serbia could seek a new, precautionary deal with the IMF after the expiry of the SBA, but the IMF resident representative in Serbia Bogdan Lissovolik said that the lender had not received such a request. Serbia is entering a new election cycle, as parliamentary elections are due to be held in May 2012. However, there are indications that the vote could be held by the end of the year. This increases the risk of higher public spending, amid high social tensions and strikes in the public sector.
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