Serbia in talks with IMF to increase emergency loan

SERBIA IS in talks with the International Monetary Fund (IMF) to sharply increase the size of an emergency loan intended to bolster its finances during the economic crisis.

Serb officials say they now need far more than the $520 million (€400 million) standby loan secured last November from the IMF, but the exact amount sought has not been formally announced.

“I believe the IMF will approve €2 billion for this year and [a total of] €3 billion for two years,” deputy prime minister Mladjan Dinkic told a business forum in Belgrade.

Other senior officials have said Belgrade is seeking about $2 billion (€1.54 billion), but have disagreed over how long a period that amount would cover.

“It should be $2 billion for this year alone, and if we are negotiating a three-year loan it will be a lot more,” Serbian central bank governor Radovan Jelasic said late last week.

“If we agree the loan, Serbia will be on the right track to maintain macroeconomic stability, prices will be under control, a greater exchange-rate stability will be guaranteed, and inflation will not eat away wages,” he added.

Officials say the IMF funds would be used mostly to cover foreign currency reserves to stabilise the ailing national currency, the dinar, which has lost about 25 per cent of its value against the euro since late last year. The central bank has spent some €500 million on the foreign exchange markets to control its slide.

Economic growth in Serbia is predicted to slow to 0.5 per cent this year, compared to an earlier forecast of 3.5 per cent, largely due to a slump in export sales.

At the same time, the country’s budget deficit is expected to double as the government seeks to plug the revenue gap.

The IMF is likely to demand strong costcutting measures as a condition of its loan.

However, deputy prime minister Bozidar Djelic has said he is opposed to “cuts of nominal wages and pensions as that would have bad economic and political effects”.

In eastern Europe, Hungary, Ukraine, Latvia and Belarus have already received IMF cash, while Romania is in talks with the fund and Montenegro and Bosnia have aired the possibility of seeking IMF help.