IMF recommends U-turn in economic policy

The International Monetary Fund (IMF) urges thorough change in Serbia’s economic policy in a report released Thursday.

Izvor: B92

Friday, 16.03.2007.

09:23

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IMF recommends U-turn in economic policy

The IMF sees sustainable economic development and low inflation figures as the two most serious macroeconomic challenges ahead of Serbia.

An IMF mission said in its report, issued after several days of meetings with Serbian state officials and central bank representatives, that the country was in need of a thorough change of economic policies, continued structural reforms, and reexamining of the entire state spending.

Noting that the Serbian budget for 2005 recorded a deficit of 1.5 percent of the GDP, the international financial institution suggested a target of 2.75 percent of the GDP surplus for 2007, in order to curb huge demand and set Serbia on a sustainable road.

IMF also advises a cut in the current payment balance, continued unconditional privatization and bankruptcy procedures, increased competition and relentless fight against corruption.

The document states that the outgoing government’s draft budget proposing a deficit of 2.75 percent of the GDP should not be adopted.

Instead, the IMF suggests another three months of continued temporary financing, if possible enabled through changes and amendments to the Law on Budgetary System.

“That would provide enough time to formulate a strong 2007 budget, accompanied with reexamination of the financial expenditure priorities,” the report said.

The institution also criticized a significant rise in wages in 2006, which stood at between 20 and 30 percent, as well as a loose budgetary policy.

“Such trends in budget and wages have additionally increased the current payment balance deficit, which now stands at 13 percent of the GDP (without the donations), financed through new foreign loans. Consequently, the external debt has grown to 62 percent of the GDP,” the IMF report said.

The highest salary hikes for 2006 and 2007 must be cancelled immediately, the document says, adding such a move would clearly demonstrate a new government’s willingness to provide moderate wages and low inflation.

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