Govt., IMF agree standby arrangement

After three weeks of talks, government and IMF representatives have agreed on a 15-month economic program—a so-called standby arrangement. Under the agreement, expenditure on salaries, pensions and subsidies “will be balanced out to achieve macro-economic stability,“ with an increase envisioned in the mass of salary payments from eight percent, and 15 percent for pensions. Govt., IMF agree standby arrangement Government spending will be significantly reduced and more strictly controled, except when it comes to capital investments. It was agreed that the budget for 2009 should be 1.5 percent GDP, announced the government’s press service. Under the standby arrangement no money would be received from the IMF, but that possibility would be left open in the event of emergency. The figure in question is USD 516mn, with the arrangement expiring in March 2010. That money will be immediately accessible if necessary, but Finance Minister Diana Dragutinovic insists that economic stability will be achieved through savings. Addressing a news conference, Dragutinovic said this program would offer Serbia the possibility "to withdraw funds if, and only if required, but we will do our best to ensure that it is not required." The minister said that the increase in the mass of payments next year would be around eight percent, but that the slower increase in public sector salaries would include the public companies too. The rise in the mass of pension payments could be up to 15 percent, which would be subject to revision if the economic situation improved quicker than currently forecast. The arrangement is the state's response to the crisis, she said. Austerity measures would be introduced at all levels, from the state itself, to municipalities, funds and social security, the minister explained. "In a word--savings. Savings will be made at all levels, at state level, at municipal level, at national insurance fund level... However, the budget clearly defines the priorities and capital investments won't be brought into doubt," she stressed. Dragutinovic said that in 2009, the budget deficit would not exceed 1.5 percent of GDP, adding that this would not be a result of an expansive fiscal policy but a stagnation in economic activities. In view of the global financial crisis and its possible impact on Serbia, the government agreed that all budget users should act responsibly and that savings had to be made at all levels, read a government statement earlier today. Besides cutting public expenditure, it was agreed with the IMF that the budget deficit for 2009 should be 1.5 percent of GDP, almost half the level of the fiscal deficit in 2008. Today's press conference: IMF mission chief Albert Jaeger, Diana Dragutinovic, Radovan Jelasic (Beta) Govt., NBS to sign memo of understanding National Bank of Serbia (NBS) Governor Radovan Jelasic said today that the government and the NBS would sign a memorandum of understanding specifying the division of responsibilities in achieving the inflation target for 2009. Addressing a press conference held at government HQ, Jelasic said that targeted inflation in 2009 would not be base inflation, but total inflation (the index of consumer prices), which should be around eight percent by the end of next year (give or take two percent). The NBS’s monetary policy would be consistent and the reference interest rate would continue to be used to achieve that goal, he explained. In order to support further austerity measures, the NBS would not approve loans to the public sector either through direct or indirect purchase of state securities, the NBS governor said. The floating regime of the exchange rate would continue to apply in the coming period as well, and the NBS would intervene only in order to cushion shocks coming from domestic or foreign sources, he said. “By March 2009, a strategy on state ownership in banks will be adopted, and the merging of the Postanska Stedionica (Post Office), Kredi Banka, Privredna Banka, and Srpska Banka will also be considered,“ Jelasic said.

Govt., IMF agree standby arrangement

Government spending will be significantly reduced and more strictly controled, except when it comes to capital investments.

It was agreed that the budget for 2009 should be 1.5 percent GDP, announced the government’s press service.

Under the standby arrangement no money would be received from the IMF, but that possibility would be left open in the event of emergency. The figure in question is USD 516mn, with the arrangement expiring in March 2010.

That money will be immediately accessible if necessary, but Finance Minister Diana Dragutinović insists that economic stability will be achieved through savings.

Addressing a news conference, Dragutinović said this program would offer Serbia the possibility "to withdraw funds if, and only if required, but we will do our best to ensure that it is not required."

The minister said that the increase in the mass of payments next year would be around eight percent, but that the slower increase in public sector salaries would include the public companies too.

The rise in the mass of pension payments could be up to 15 percent, which would be subject to revision if the economic situation improved quicker than currently forecast.

The arrangement is the state's response to the crisis, she said. Austerity measures would be introduced at all levels, from the state itself, to municipalities, funds and social security, the minister explained.

"In a word--savings. Savings will be made at all levels, at state level, at municipal level, at national insurance fund level... However, the budget clearly defines the priorities and capital investments won't be brought into doubt," she stressed.

Dragutinović said that in 2009, the budget deficit would not exceed 1.5 percent of GDP, adding that this would not be a result of an expansive fiscal policy but a stagnation in economic activities.

In view of the global financial crisis and its possible impact on Serbia, the government agreed that all budget users should act responsibly and that savings had to be made at all levels, read a government statement earlier today.

Besides cutting public expenditure, it was agreed with the IMF that the budget deficit for 2009 should be 1.5 percent of GDP, almost half the level of the fiscal deficit in 2008.

Govt., NBS to sign memo of understanding

National Bank of Serbia (NBS) Governor Radovan Jelašić said today that the government and the NBS would sign a memorandum of understanding specifying the division of responsibilities in achieving the inflation target for 2009.

Addressing a press conference held at government HQ, Jelašić said that targeted inflation in 2009 would not be base inflation, but total inflation (the index of consumer prices), which should be around eight percent by the end of next year (give or take two percent).

The NBS’s monetary policy would be consistent and the reference interest rate would continue to be used to achieve that goal, he explained.

In order to support further austerity measures, the NBS would not approve loans to the public sector either through direct or indirect purchase of state securities, the NBS governor said.

The floating regime of the exchange rate would continue to apply in the coming period as well, and the NBS would intervene only in order to cushion shocks coming from domestic or foreign sources, he said.

“By March 2009, a strategy on state ownership in banks will be adopted, and the merging of the Poštanska Štedionica (Post Office), Kredi Banka, Privredna Banka, and Srpska Banka will also be considered,“ Jelašić said.