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IMF approves USD 147 million in two tranches under extended arrangement with Serbia-Montenegro

Washington / Belgrade, 8 June 2004

The International Monetary Fund (IMF) executive board has completed its third review of Serbia-Montenegro's economic performance under the ongoing three-year extended arrangement, allowing the state union to draw USD147 million in two tranches, Serbian Minister of Finance Mladjan Dinkic said yesterday.

Mladjan Dinkic

The decision to resume the arrangement after a hiatus of nearly 12 months is of high importance for the write-off of the state union’s debt with the Paris Club of sovereign creditors, said Dinkic, adding that the Paris Club wrote off 51% of the debt and promised to forgive a further 15%, or some USD 600 million, upon completion of Serbia-Montenegro’s three-year arrangement with the IMF.

Recalling that the IMF approved the extended arrangement in May 2002 to support Serbia-Montenegro's economic program in 2002-2005, the Minister said that the release of another two tranches is the biggest economic success of the Serbian government.

The move will help improve Serbia’s image abroad and pave the way for macroeconomic assistance from the European Union and other foreign institutions, Dinkic noted.

“Serbia-Montenegro has made good progress in lowering inflation, attracting foreign direct investment, and strengthening foreign reserves, while macroeconomic policies are broadly on track,” IMF First Deputy Managing Director and Acting Chair Anne Krueger said following the IMF executive board meeting last night.

However, Krueger called on Serbia-Montenegro to restrain demand and speed up structural reforms in order to strengthen growth and improve its external position, which she said “continues to be vulnerable to adverse shocks.”

Krueger also urged the state union to continue negotiations with the London Club of commercial creditors to restructure its debts on terms similar to those granted by the Paris Club. The success of debt rescheduling talks will depend on the authorities' “credibility in forcefully implementing the policy framework,” she added.