IMF: Serbia needs economic self-discipline

Serbia should offer transparent economic figures to make sure financial markets trust its policies, IMF said Friday.

Izvor: Reuters

Saturday, 14.04.2007.

18:04

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IMF: Serbia needs economic self-discipline

With politicians still wrangling over a new coalition 11 weeks after the inconclusive Jan. 21 general election, the IMF fears that the central bank's independence could be at stake and the post of the governor part of political bargaining, he said.

To make a difference, Serbia should provide clear rules for the governor's appointment and make its budget figures readily available to the public, he said.

"The alternative to macroeconomic self-discipline is not worth considering," he said.

Last month Serbia fully repaid its debt to the IMF three years earlier than the Fund had expected and the outgoing government of Prime Minister Vojislav Koštunica has backed down on most policy pledges made under a 2002-05 loan deal.

IMF loan deals served in the past six years as a strong signal to foreign investors that Serbia would stick to reforms.

Even without a loan deal, the IMF can continue to support the markets as long as policies stay on track, Hirschhofer said.

But market confidence will be the key to avoiding a financial crisis now that Serbia has neither a binding deal with the lender nor a place in the European Union to make it stick to tough policy goals, he said.

"Until Euro area membership is secured, Serbia faces the discipline of a much tougher referee than the IMF (or the EU) - the financial market," Hirschhofer said in the article.

"When they see policies going seriously wrong, financial crises occur. These crises are very painful to citizens... And though such events 'blow the whistle' and stop the 'game', they by definition do so too late to prevent the crisis," he said.

His article was published a month after the IMF urged Serbia to recast its macroeconomic policies, turn its budget gap into a surplus and abandon a US$ 2.0bn investment plan intended to improve infrastructure, health and education.

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