Bloomberg News

Serbia to Discuss IMF Loan After EU Entry Talks, Dacic Says

May 20, 2013

Serbia may discuss a possible new precautionary loan with the International Monetary Fund once the Balkan nation wins the right to begin European Union membership talks, Prime Minister Ivica Dacic said.

The IMF is waiting for an EU decision in June on whether Serbia will be given a start date, Dacic said in Belgrade today. The mission that wraps up a two-week inspection tomorrow of the Serbian economy as part of a periodic Article IV consultation hasn’t opened negotiations with the former Yugoslav republic on a new loan, he said.

“The second half of the year will be more favorable for loan talks,” Dacic said after meeting executives of foreign companies in Serbia.

Serbian officials hope to start membership talks on June 28, taking another step closer to the Brussels-based bloc. Dacic’s 10-month old Cabinet last month signed a political agreement with the breakaway province of Kosovo and now needs to make progress to start implementing the pact to get the date.

The IMF suspended a $1.3 billion precautionary loan with Serbia in February 2012 on evidence the previous government was slipping on deficit and debt targets. It told Serbia in November to cut debt without choking economic growth, citing an unsustainable fiscal gap, volatile inflation and high unemployment.

The government has pledged to implement a fiscal consolidation plan to narrow the budget gap to 3.6 percent of economic output from 6.7 percent last year. Finance Minister Mladjan Dinkic said on May 10 the gap will likely be 4.5 percent of GDP.

Serbia’s budget gap reached 62.3 percent of the full-year target in the first four months as social-benefit payments doubled and payments of interest rates on debt more than tripled.

The central government deficit expanded to 75.9 billion dinars ($880 million), compared with a 122 billion-dinar shortfall planned for the entire year.

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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