Iskra Pavlova in Sofia -

Serbia and the visiting International Monetary Fund have reached an agreement on a new three-year precautionary loan deal worth some €1bn, the head of the IMF mission to Serbia, Zuzana Murgasova, said on November 20, as quoted by news agency Beta.

The IMF stand-by loan deal is regarded by foreign investors as a crucial sign that the government is serous about embarking on reform and fiscal consolidation to support the economy, which is suffering from the effects of the floods earlier this year and the general slowdown in Europe.

Murgasova told a news conference that the arrangement now needs the approval of the IMF's management and executive boards. She said the economic programme that the government in Belgrade will implement with the support of the IMF aims to create conditions for macroeconomic stabilisation, sustainable economic growth and the creation of new jobs over the medium term.

No precise details on the agreed economic plan were made available. The IMF mission started its visit on November 4 and completed it on November 20.

The new arrangement is expected to set out the government's plans for 12 key state-owned companies, including Telekom Srbija, railway operator Zeleznice Srbije, power grid operator EMS, power producer EPS, postal operator Posta Srbije, state roads operator Putevi Srbije and water resources management firm Srbijavode.

Serbia's previous €1bn stand-by deal with the IMF was frozen by the Fund in February 2012 over signs of fiscal slippage. Another attempt by the government to reach an agreement with the IMF failed in 2013 when the parties again disagreed over vital fiscal austerity issues, with the Fund warning that any further support depends on cuts in the public sector and the pension system.