IMF loans €1bn to Serbia

Serbia has agreed a three-year precautionary loan deal with the IMF worth around €1bn, ending uncertainty that had weighed on the dinar currency.

The Serb government hopes the deal will reassure markets concerned over the Balkan country’s budget deficit and public debt, which have spiralled since the onset of the global crisis six years ago.

The deal, news of which briefly pushed the dinar up from the euro-era lows to which it had plumbed last week, replaces an arrangement frozen in early 2012 over broken promises to limit spending.

Zuzana Murgasova, head of the visiting IMF mission, said the agreement was subject to approval by the IMF managing board. Serbianfinance minister Dusan Vujovic said he expected it to enter into force from January, hailing “a historic step”.

Serbia’s government has already cut some pensions and public sector wages from the beginning of this month, and is expected to slash subsidies to hundreds of state-run enterprises in its 2015 spending plan — trying to rein in a consolidated budget deficit of more than 7% of output and cap public debt pushing 70%.

Murgasova said that the goal was to slow the rise in public debt and reverse it by 2017.

Vujovic said the government was targeting savings of around €1.3bn by 2017, when he said the consolidated budget deficit would be 4.25% of national output.

Reuters