Identidad corporativa Mapa de públicos Objetivos Mensajes.

The IMF approved in January 2009 a 15-month, US$530.3 million SBA to help the Republic of Serbia maintain macroeconmic and financial stability. The Serbian authorities “intend to treat the arrangement as precautionary, and not to draw on Fund resources unless the need arises.”1

Serbia’s financial buffers should be enough as a first line of defense against the threat of contagion from the international crisis, but the SBA request states that “implementation of much stronger policies than in the past will be needed to maintain market confidence.”2 _{Moreover, the program}

focuses on “upfront fiscal restraint, with the 2009 deficit limited to 1.75 percent of GDP; containing inflation, while maintaining a managed float to facilitate external adjustment; strengthening crisis preparedness, and reforms to boost the economy’s supply side.”

At the time the SBA was signed, Serbian GDP was expected to have grown 6.0 percent in 2008 and the projection for 2009 stood at 3.5 percent. Inflation projections indicated 9.5 percent for 2008 and 8.0 percent for 2009. On public finances, the fiscal deficit (cash basis), reached 1.9 and 2.3 percent of GDP in 2007 and 2008, respectively. For 2009, the program calls for bringing the government deficit down to 1.8 percent of GDP.3

During 2008 the stock market fell, while sovereign spreads widened and the dinar (local currency) depreciated considerably against the euro. Households, alarmed by rumors and by the situation in other countries, have withdrawn some of their deposits.4 _{Meanwhile, the current account balance}

rose to almost 18 percent of GDP in 2008 (from 16 percent in 2007), and is expected to remain at 16 percent of GDP in 2009. Private external debt also increased from 26.2 percent of GDP in 2005 to a projected 50.8 percent in 2009.5

As in other countries, financial and economic fragility increased as the international situation worsened, and the agreement served as a shield against further deterioration of local and international conditions.

The proposal submitted to the IMF argues that “fiscal restraint will be a cornerstone of the authorities’ program.”6 _{It also indicates that “given Serbia’s history of fiscal dominance, restraint is}

also needed to reassure investors and the Serbian public that policies remain on sound footing.”7

Specific measures adopted by the Serbian authorities included the suspension of pension indexation in 2009, the adjustment of public sector wages only by projected inflation, and the suspension of non-essential hiring. Public enterprises and local governments are expected to follow similar wage procedures.8 1 _{IMF 2009a.} 2 _{IMF 2009b, 1.} 3 _{IMF 2009b, 26.} 4 _{IMF 2009b, 5.} 5 _{IMF 2009b, 26.} 6 _{IMF 2009b, 12.} 7 _{Ibid, 12.} 8 _{Ibid, 12.}

The program also considers various options to increase taxes, restoration of dividend transfers from public enterprises and streamlining spending on goods, services, and on subsidies. It is worth noting that the government budget “preserves allocations for capital spending, enterprise restructuring, and subsidized lending to small- and medium-sized enterprises.”9

The program also warns that if the fiscal objectives are put in danger by the conditions in the local and global economy, then “the authorities stand ready to reduce discretionary spending further and – as a last resort – to increase the VAT rate.”10

On the monetary side, the program “supports strengthening the focus on inflation targets as the economy’s nominal anchor.”11 _{The foreign exchange regime remains a managed float.}

Finally, the program emphasizes the authorities’ determination to pursue structural reforms; in particular, they will “push ahead with privatization and enterprise restructuring plans, notwithstanding the difficult economic environment.”12 _{Moreover “wage policies in public}

enterprises will be strictly controlled to avoid adverse wage dynamics and encourage rationalization.”13

Projections for the 2009 level of several variables had to be modified in May: real GDP growth in 2009 was now expected to be -2.0 percent (instead of the 3.5 percent mentioned above), and the fiscal deficit would reach -3.0 percent of GDP (instead of the 1.8 percent originally estimated). Adverse conditions in the world economy put downward pressure on exports, while depressed local activity (combined with currency depreciation) contributes to a decrease in imports. The current account deficit fell due to a slumping domestic economy and currency depreciation.

The September 2009 review of the SBA14 _{projects that output will decline 4 percent in 2009, and}

that the fiscal deficit has to be adjusted upwards due to the reduction in government revenue which results from the downturn. Careful monitoring of government spending will continue throughout 2009 and 2010.15

In the monetary sector, broad money and credit to the private sector have increased only slightly over the inflation rate from January through August 2009; however, the National Bank of Serbia’s policy rate dropped from 17.75 percent to 12 percent.16 _{Moreover, a similar declining pattern was}

observed for the weighted lending rates of commercial banks;17 _{it is clear that the central bank is}

attempting to pursue counter-cyclical monetary policy.

However, the September review states that: “Monetary policy should continue to focus on inflation.” It is later argued that, the economic slowdown notwithstanding: “further monetary easing

9 _{Ibid, 13.} 10 _{Ibid, 13.} 11 _{Ibid, 13, 14.} 12 _{Ibid, 15.} 13 _{Ibid, 15.} 14 _{IMF 2009c.} 15 _Ibid.

16 _{National Bank of Serbia 2009a.} 17 _{National Bank of Serbia 2009b.}

should proceed with caution.”18 _{So even though the SBA review seems to insist on the need to}

focus on inflation controls, the implementation of the program appears to move along a more counter-cyclical pattern.