An IMF delegation reached an agreement Wednesday with Serbia on a standby loan of euro1 billion ($1.4 billion) and warned that Europe’s financial debt crisis will hurt growth in the Balkan nation.
Serbian officials said the 18-month deal with International Monetary Fund is crucial for the country in order to preserve stability, attract much-needed foreign investment and boost jobs in a country where unemployment stands at around 20 percent. They said they will not draw the money unless absolutely necessary.
IMF mission chief Albert Jaeger, meanwhile, told reporters that Serbia’s projected growth for 2011 and 2012 will be lower than initially expected, down from 3 percent to 2 percent for 2011, and from 4.5 percent to 3 percent in 2012.
“The Serbian economy is gradually recovering from a severe downturn,” Jaeger said. “At the same time, indications of slowing European growth and trade are clouding the outlook.”
Meanwhile, Serbia’s agreed budget gap for this year was raised from 4.1 percent to 4.5 percent of GDP, and planned at 4 percent for 2012, Jaeger said.
“Unfortunately,” he added, “recent data have disappointed and we were forced to revise downward.”
Jaeger said Serbia still needs to carry out painful reforms in a number of sectors, including its labor market, but he suggested the Serbian government appeared unwilling to move forward with reforms because it faces an election next year.
“The agreement presents a signal that this government will conduct a responsible policies,” said Serbia’s National Bank Governor Dejan Soskic. “This is very important at this time of crisis.”
Serbia’s previous agreement with the IMF — which expired in April — was worth euro2.9 billion ($4.18 billion) and it withdrew some euro1.5 billion ($2.16 billion) from the total credit line.
The latest deal still needs approval from IMF’s headquarters in Washington.
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Source money.msn.com
