Serbia Expects IMF Deal to Be Approved by Feb. 23, Vujovic Says

Serbia and the International Monetary Fund will finalize details of a precautionary loan agreement next month as the government struggles to restore growth and the country faces a second year of economic contraction.

Premier Aleksandar Vucic’s nine-month old government reached a staff-level agreement with the Washington-based lender in November and the progress of its commitments under that accord will be monitored as of January 1 this year, Finance Minister Dusan Vujovic said in an interview in Vienna on Tuesday.

“In the next couple of days, a week or two we are finalizing the memorandum of economic and financial policies and the IMF is finalizing the package,” Vujovic said. “It’s going to be a precautionary arrangement. The plan is to send the package to the board on Feb. 1” and “we can assume that we will have the program approved on Feb. 23.”

The IMF last suspended its arrangement with Serbia in early 2012 when then government slipped on agreed fiscal targets and paid subsidies to state-owned gas company ahead of general elections that year. Serbia hasn’t negotiated any new agreement since then.

Vucic has been promising an agreement with the IMF since April, when his government took office after early elections in March 2014. The government needs to refrain from new subsidies and guarantees for unprofitable companies for the accord to be reached, Tony Verheijen, the World Bank country director for Serbia, said in a Jan. 15 interview.

Serbia’s economy will contract 0.5 percent this year after a 2 percent decline in 2014, as its agriculture and industries recover from last year’s devastating floods and the government cuts public wages and pensions to curb the budget deficit, the World Bank said in a report in Belgrade on Tuesday.

Positive Growth

“This is a conservative projection,” Vujovic said. Growth has “bottomed out” in the third quarter of 2014 and “still has a negative carry-over effect in 2015.”

Restructuring of some of the most unprofitable companies, including the Zelezara Smederevo doo steel mill or three chemical producers and the revival of coal and electricity output may “produce a positive growth” which will still depend on economic revival in Europe and the European Central Bank’s policies, he said.

The government expects to sell the country’s most profitable asset, Telekom Srbija AD this year. “We are anticipating that the whole process will be finalized in 2015,” Vujovic said.