IMF loan to help stabilise Serbian economy

The International Monetary Fund's executive board has approved a loan of 402.5 million euros to Serbia to help it cope with the global financial crisis.


AFP - The International Monetary Fund's executive board on Friday approved a 530-million-dollar loan for Serbia to help it cope with the global financial crisis, it said in a statement.

The board "approved a 15-month ... stand-by arrangement (about 402.5 million euros or 530.3 million dollars) to support the authorities' program aimed at maintaining macroeconomic and financial stability," the IMF said.

The approval makes 353.3 million dollars "immediately available. However, the Serbian authorities intend to treat the arrangement as precautionary, and not to draw on fund resources unless the need arises," it said.

"Serbia's recent stretch of robust growth and moderate underlying inflation -- underpinned by large capital inflows -- has been accompanied by the build-up of sizable external imbalances and vulnerabilities," said deputy managing director Murilo Portugal.

"With the global financial turmoil spilling over to Serbia, a rebalancing of the economy through a sharp slowing of credit and domestic demand seems necessary," he said according to an IMF statement issued after the decision.

The Serbian parliament last month approved an IMF-backed restrictive 2009 budget, adjusted to the expected consequences of the worldwide financial crisis.

Downgrading growth from initially expected 6.5 to 3.5 percent of GDP, the government plans to reduce the current account deficit to 16.3 percent of GDP, about 1.5 percentage points less than expected before the world financial crisis hit Serbia's fragile economy.

The targeted inflation for 2009 is eight percent.

In November, an IMF mission helped the Serbian government draft the 2009 budget and reached an accord with Belgrade on a 15-month stand-by agreement to allow Belgrade to draw on the IMF loan if needed.

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