Government, IMF to begin negotiations

Serbian government and the IMF will begin negotiations on the sixth revision of the credit arrangement on Monday and their main topic will be the state budget.

Izvor: B92

Sunday, 24.10.2010.

13:54

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Serbian government and the IMF will begin negotiations on the sixth revision of the credit arrangement on Monday and their main topic will be the state budget. The International Monetary Fund (IMF) representatives and the government had technical talks several days ago. Government, IMF to begin negotiations Budget revision, which envisages higher deficit in the terms of the amount of money and equal deficit in terms of percentage, means that we will have more money but we will not have higher purchasing power. The secret lies in inflation. Economists think that this will be one of the main topics of the talks. “Question which will certainly be opened is why targeted inflation, which was eight percent, will be exceeded, what happened there,” said PM’s economic advisor Jurij Bajec. “Another question that will be discussed is to what extent we will maintain promised fiscal deficit of 4.8 percent of GDP,” he explained. It seems that the state has found a way to keep the budget deficit percentage at the same level, to make bigger money supply and to cover expenses. In case the inflation is six percent GDP is RSD 3.23bn, while it amounts to RSD 3.191bn if there is a nine percent inflation. In both cases the budget deficit will be the same – 4.8 percent. The arrangement with the IMF will officially expire in April but it does not mean that Serbia will end its cooperation with the IMF. “Our debt is over 200 percent of the quota, a process which will continue until the debts is paid off. The control function of the IMF will continue here regardless of whether the arrangement will continue after 2011 or not,” National Bank of Serbia (NBS) Vice Governor Bojan Markovic pointed out. Many experts publically state that it is necessary and useful for Serbia to extend the arrangement with the IMF. The government will make that decision next spring. The IMF representatives will stay in Belgrade until November 2.

Government, IMF to begin negotiations

Budget revision, which envisages higher deficit in the terms of the amount of money and equal deficit in terms of percentage, means that we will have more money but we will not have higher purchasing power. The secret lies in inflation.

Economists think that this will be one of the main topics of the talks.

“Question which will certainly be opened is why targeted inflation, which was eight percent, will be exceeded, what happened there,” said PM’s economic advisor Jurij Bajec.

“Another question that will be discussed is to what extent we will maintain promised fiscal deficit of 4.8 percent of GDP,” he explained.

It seems that the state has found a way to keep the budget deficit percentage at the same level, to make bigger money supply and to cover expenses.

In case the inflation is six percent GDP is RSD 3.23bn, while it amounts to RSD 3.191bn if there is a nine percent inflation.

In both cases the budget deficit will be the same – 4.8 percent.

The arrangement with the IMF will officially expire in April but it does not mean that Serbia will end its cooperation with the IMF.

“Our debt is over 200 percent of the quota, a process which will continue until the debts is paid off. The control function of the IMF will continue here regardless of whether the arrangement will continue after 2011 or not,” National Bank of Serbia (NBS) Vice Governor Bojan Marković pointed out.

Many experts publically state that it is necessary and useful for Serbia to extend the arrangement with the IMF. The government will make that decision next spring.

The IMF representatives will stay in Belgrade until November 2.

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