Belgrade - International Monetary Fund (IMF) experts, due in Belgrade in October to review Serbia's compliance with terms of a standby loan, will want concrete measures instead of "promises" to unblock the 4-billion-dollar credit, central bank Governor Radovan Jelasic said in an interview released Thursday. "The IMF accepts (Serbian) government arguments that the budget deficit is being reduced by spending cuts," Jelasic told the daily Blic. "But since we did not prove ourselves much by implementing those measures ... it is not likely that the 'I promise' will work."
Serbia and the IMF agreed the standby facility in March in a bid to ease the effects of the economic crisis. The first of the four planned tranches was released in May, but the second was suspended in September because Belgrade failed to contain spending.
As a result, the 2009 budget deficit is expected to reach 4.5 per cent of GDP, instead of 3 per cent Serbia initially agreed to in order to get the credit.
The IMF last month actually relaxed the terms and accepted the new deficit target for this year, but insisted on a shortfall of less than 3.5 per cent in 2010 and withheld the second tranche of the loan until Serbia present a plan to achieve the goal.
If Belgrade officials persuade the visiting mission in October that spending cuts are enough to put a lid on the deficit, the IMF will release the second and the third tranches of the loan, or roughly 2 billion dollars, at once.
A frequent critic of what he calls lacklustre reforms, Jelasic believes that Prime Minister Mirko Cvetkovic's money-saving plan, which includes thousands of job cuts in the administration, will not be enough to meet IMF demands on deficit limitation.
Parallel to the standby arrangement with the IMF, Serbia sought a 1-billion-euro (1.46-billion-dollar) credit from Russia, 350 million euros of which is intended to cover the budget deficit.
The formal announcement of the Russian credit is expected during Russian President Dmitry Medvedev's visit to Belgrade on October 20.
Unlike Serbian officials who hailed the expected credit from Moscow, Jelasic warned against the "increasing borrowing rate" and repeated his call for harsh saving measures.
"This year we will end with an additional 1.5 billion euros of debt ... which may lead to additional borrowing, unless nothing changes," he said. "Without adequate measures to cut the budget deficit, our economy will be in problems in mid- and long-term."
