BELGRADE, Serbia (AP) — The International Monetary Fund started reviewing a €2.9 billion ($3.7 billion) bailout loan deal with Serbia on Monday against a backdrop of weak economic indicators, with the national currency falling and prices surging.
An IMF delegation met Serbian government officials for a scheduled evaluation of the latest fiscal, monetary and macroeconomic developments. The review is the fifth since the two-year loan was first approved in May 2009.
Serbian officials say that special focus will be on Serbian demands for the unfreezing of wages and pensions and a draft law on "fiscal responsibility" that should curb public spending and prevent uncontrolled foreign borrowing.
There is a split within the Serbian government over whether the country’s budget inflow is strong enough to boost salaries and pensions in the state sector. The national bank governor says it is not, while a deputy prime minister urges IMF’s de-blocking of state wages to boost economic activity.
A government statement issued after Monday’s talks said that the head of the IMF delegation expressed satisfaction with Serbia’s current fiscal policies. The Fund’s officials said they would not comment before the talks end Aug. 31.
The negotiations are being held amid a sharp drop of the Serbian dinar and resulting price hikes for staples such as bread, cooking oil and milk. The dinar is currently trading at 105.05 per euro — down from highs of 75.75 a euro in August 2009.
Serbia has already taken €1.4 billion from the original standby loan and the current talks will determine whether the IMF allows further withdrawals.
Serbia says it needs the IMF loan to boost its foreign currency reserves — which currently stand at €9.5 billion — to stabilize the dinar.
