Serbia has asked the International Monetary Fund for €3 billion in a two-year loan programme - a billion more than originally planned - to back its strained finances, a top official said today.
“I believe that the IMF will approve €2 billion for this year and (a total of) €3 billion for two years," Deputy Prime Minister Mladjan Dinkic told a business forum.
The higher-than-expected number is the latest of many signs that the world economic crisis is having a greater impact on the Balkans than politicians predicted just months ago.
In the talks with the IMF that started earlier today, Serbia is seeking to replace a $520 million deal approved last November, with a focus on safeguarding its currency reserves.
“The IMF loans will be important for the nation's confidence in our entire system," Dinkic said. Serbia expects the IMF will approve a wider fiscal gap of at least 3 per cent of GDP, up from 1.75 per cent agreed under the previous stand-by loan.
The government of Prime Minister Mirko Cvetkovic has yet to unveil any spending cuts, seen as the key for a new loan.
Industrial output fell in January by 17.1 per cent year-on-year, inflation shot up to 10.7 per cent and the central bank spent more than $500 million in the same month to close the balance of payments gap.
The IMF loan would replenish hard currency reserves, reported at €7.99 billion for January.
Serbian Deputy Prime Minister Bozidar Djelic said the key economic data Serbia will present to the IMF at the talks, expected to end next week, “differ in few decimals, give or take, a percentage points at most,” from those prepared by the international lender.
Djelic said he was opposed to "cuts of nominal wages and pensions as that would have bad economic and political effects.
”In the situation when the global demand for Serbian products is dwindling, a further reduction of demand through cuts would not be smart,” Djelic said on a sidelines of the business forum.
Last week, Dinkic said the government would need to borrow around €500 million from foreign commercial banks to finance its budget.
Reuters