Serbia is negotiating with the International Monetary Fund (IMF) about a new arrangement, which will probably be agreed, but which will not be financial, as “we don’t need financial support, not even the precautionary kind”, Prime Minister Ana Brnabic said today.
She pointed out that Serbia had changed a lot in the preceding three years, partly because of the arrangement with the IMF, which ends on February 22, and that the country had achieved macroeconomic stability, fiscal consolidation and discipline.
Brnabic emphasized that there were still structural reforms that need to be carried out and that this would be discussed with the IMF.
Serbia exits a USD 1.32 billion three-year program with the IMF on February 22 boasting outperformance on several of its goals. Concluding the program with flying colors is, however, only the first step in building a strong and vibrant economy able to compete globally, a recent IMF report observes.
– The program has done much better than expected, overperforming many of its macroeconomic goals – said James Roaf, head of the IMF’s Serbia team.
He pointed out that Serbia had managed to dig itself out of a hole and that, after stalling for years in the wake of the global financial crisis, growth had returned, coupled with rising investment and employment.
– A lot of work has been started to transform the country into a full-fledged market economy; these reforms need to be deepened after the conclusion of the program for Serbia to reach its full potential – Roaf recommended.
The IMF reminds that, in 2014, Serbia’s economy was in serious trouble. Following the 2008 global financial crisis, the country’s economy stagnated, while weak public institutions, collapsing tax receipts, and overspending by government and state-owned enterprises resulted in a rapid buildup of public debt.
The report also says that the fiscal accounts boasted a surplus in 2017 and that economic confidence has improved with stronger investment both from foreign and domestic sources.
It adds that unemployment is near historic lows, and falling, that banks are solid, and that nonperforming loans are now below their precrisis levels.
– The government should concentrate its efforts on helping the country catch up faster with its Western European peers. Reaching that goal is urgent to avoid the exodus of skilled Serbian workers in search of a better life – the IMF recommends.
Serbia is advised to strengthen its institutions to support private-sector-led growth and that modernization should include tax administration and public services such as education and health.
– Financial market development must accompany broader use of the Serbian dinar instead of the euro – the IMF recommends and adds that large grey economy should be addressed through wide-ranging reforms and that state companies should be reformed.
The report says that Serbia has restructured its inefficient railway company, introduced better debt collection in the main electricity and gas companies, and successfully privatized others, such as the Smederevo steelworks.
– The sectors most in need of overhaul are mining and petrochemicals: companies such as the Resavica coal mine, the RTB Bor
copper complex, and petrochemical producers Petrohemija, MSK, and Azotara
– the IMF says and points out that several state-owned financial institutions—for example, the BPS and Komercijalna Banka and Dunav insurance company—are also in need of reform or privatization.
According to the IMF, in addition to reforming the tax and regulatory systems, Serbia needs to address the problem of multiple fees and charges, and delays and uncertainty in the judicial system. It also needs better road, telecommunications, and energy networks, which will propel Serbia toward a standard of living that rivals that of Western Europe.
The three-year arrangement of Serbia with the IMF
, worth USD 1.32 billion, was agreed in late 2014, at the time Serbia started implementing fiscal consolidation measures.