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IMF commends Serbian government on restructuring efforts

Belgrade/Washington, 18 April 2005

Serbian Minister of Finance Mladjan Dinkic stated last night that the International Monetary Fund (IMF) believes that Serbia should additionally reduce public spending, that is the budget balance should be better than planned and added that the IMF commended the Serbian government on its efforts to restructure the economy and public sector, as well as on the results of privatisation.

Mladjan Dinkic

Dinkic told Radio Television Serbia that although this year’s budget deficit should be only 1.4 percent of the GDP, IMF representatives believe that additional adjustments are needed in order to reduce the foreign balance of payments deficit.

The Minister of Finance, who is member of the Serbian government delegation in negotiating with IMF representatives, said that sustaining the pension system presents a problem as it is by far the biggest expenditure item in the Serbian budget and because it is constantly growing. “We have to completely reform the pension system and we will also talk about this with IMF representatives”, Dinkic added.

He pointed out that negotiations are underway with the IMF about a $700 million debt write-off, which will conclude the three year arrangement with the IMF.

The IMF figures that this year there could be a 25 percent real export growth rate, which is not easy to achieve, the Minister said and added that in order to attain this goal it is not enough to restructure the economy alone, but also to reduce public spending.

Dinkic said that an agreement was reached yesterday with the World Bank about projects related to the reform of administration and pension insurance worth $135 million, as well as the construction of an irrigation network worth $25 million.

He added that a project should be signed for reconstructing the Serbian road system worth $55 million, and that negotiations are currently underway for a project to improve the ecological situation in Bor.

The Serbian government delegation also includes Serbian Deputy Prime Minister Miroljub Labus, Minister of Economy Predrag Bubalo, National Bank of Serbia Governor Radovan Jelasic, director of the Serbian Investment and Export Promotion Agency (SIEPA) Jasna Matic and representative of the Privatisation Agency Goran Mrdja.