Bloomberg News

Serbian Top Opposition Party Backs Renewal of IMF Loan Deal

April 24, 2012

Serbia’s biggest opposition group, the Progressive Party, supports the renewal of the loan program with the International Monetary Fund and will back the existing monetary policy framework if they win May 6 elections.

“We absolutely support the renewal of the arrangement with the International Monetary Fund,” said Jorgovanka Tabakovic, who polls predict will be Serbia’s next prime minister, the first-ever woman to take that post in Serbia.

Her party was set up in 2008 after a group of more moderate nationalists left the Serbian Radical Party of Vojislav Seselj, who is standing trial before the war crimes tribunal in The Hague. The Progressives turned into the most popular party in Serbia, banking on widespread discontent amid global recession and Europe’s debt crisis that has left 400,000 people without work, weakened the dinar 30 percent against the euro and forced the government to borrow heavily to avoid economic slump.

Any new program with the Washington-based lender will be “precautionary” so Serbia will draw no cash, she said. “We need the IMF for their advisory and control role,” she told members of the American Chamber of Commerce in Belgrade today.

Job Creation

The Progressives would back the existing monetary policy framework, which relies on inflation targeting, supporting the central bank efforts to further expand the use of the dinar in financial transactions, Tabakovic said, adding that the monetary policy will ultimately have to aim to help create jobs.

Serbia and the IMF agreed to freeze a $1.3 billion precautionary loan program in February until a new Cabinet emerges after May 6 elections for president, parliament and local governments.

The Progressive Party and its president Tomislav Nikolic lead in opinion polls both for parliament and president over the ruling Democratic Party of incumbent President Boris Tadic.

Tadic’s Democrats, who last month managed to win Serbia the candidacy for the European Union membership, would try to rely more on the EU, former Deputy Prime Minister Bozidar Djelic said. He is personally leading a Western Balkan campaign with the bloc, offering the region’s key financier powers to monitor regional budget performance on semi-annual basis and releasing aid to those who stick with agreed fiscal targets.

Serbia’s new Cabinet, emerging after the May 6 ballot, will need to quickly adopt measures to bring the budget deficit below 4.5 percent of economic output and the public debt to 45 percent of GDP, the levels imposed by fiscal rules.

Tabakovic said her party would introduce a tax on banks’ “balance sheet items and on their services” as “Serbia must relax tax pressure on the manufacturing sector and shift it to the financial sector, not because we want to force banks to leave Serbia, but because we want the real sector to attract even more investment,” she said. Any taxation would be introduced following a “frank” debate with banks, she said.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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