"Govt. to seek higher deficit from IMF"

Prime Minister Mirko Cvetkovic says that the government will seek the IMF’s permission to raise the budget deficit. “It turns out that the deficit of three percent GDP that we hammered out with the budget review is very low compared to other countries. That’s why the application to raise the deficit is a good basis for talks with the IMF, as it’s a way of increasing spending and mitigating the recessionary effects of the crisis,“ Cvetkovic told Belgrade's Ekonomist magazine. "Govt. to seek higher deficit from IMF" The minister stressed that the government would endeavor to fit planned spending in with budget revenue from now until the end of the year. “Revenue in May was less than planned, but not alarmingly so, as regular income from tax and customs were in line with expectations. The budget was shorn of 40 percent of state institutions’ revenue, nor has income from the public companies been paid in,“ he explained, adding that there would hardly be any deficit had those two sources of income been used. Following warnings from the National Bank of Serbia that the third tranche of the existing credit arrangement could be withheld until the agreed conditions had been met, Cvetkovic said that the speed at which the IMF money arrived was not the key issue as Serbia did not have any problems with its hard currency reserves. Rather, the problem lay in fiscal revenue and spending. “That can’t be financed with the IMF money. That money is a safety guarantee that hard currency reserves can withstand any, even external, pressure on the foreign currency market, and that we can preserve exchange rate stability even if everyone started converting dinars into euros,“ the minister emphasized. He added that any delay in the arrival of the third IMF tranche would have no visible macroeconomic consequences, but could, on the other hand, lead to fall in confidence in Serbia. Asked what the government planned to do if the fall in GDP was at least double the officially projected two percent, Cvetkovic replied that given the current state of public finances, it would not necessarily lead to a new budget review. Mirko Cvetkovic (FoNet, archive)

"Govt. to seek higher deficit from IMF"

The minister stressed that the government would endeavor to fit planned spending in with budget revenue from now until the end of the year.

“Revenue in May was less than planned, but not alarmingly so, as regular income from tax and customs were in line with expectations. The budget was shorn of 40 percent of state institutions’ revenue, nor has income from the public companies been paid in,“ he explained, adding that there would hardly be any deficit had those two sources of income been used.

Following warnings from the National Bank of Serbia that the third tranche of the existing credit arrangement could be withheld until the agreed conditions had been met, Cvetković said that the speed at which the IMF money arrived was not the key issue as Serbia did not have any problems with its hard currency reserves. Rather, the problem lay in fiscal revenue and spending.

“That can’t be financed with the IMF money. That money is a safety guarantee that hard currency reserves can withstand any, even external, pressure on the foreign currency market, and that we can preserve exchange rate stability even if everyone started converting dinars into euros,“ the minister emphasized.

He added that any delay in the arrival of the third IMF tranche would have no visible macroeconomic consequences, but could, on the other hand, lead to fall in confidence in Serbia.

Asked what the government planned to do if the fall in GDP was at least double the officially projected two percent, Cvetković replied that given the current state of public finances, it would not necessarily lead to a new budget review.