Serbia: IMF program recognizes negative risks to growth
Overview:
The approval of a EUR3 billion program with the IMF has increased confidence that the authorities will successfully manage the painful downward adjustment of the large current account deficit. While financial markets are stabilising1 and the central bank now has more foreign exchange reserves at its disposal the government still has work to do. The fiscal adjustment that it is already enacting to win this larger IMF program is significant. However, all sides recognise that in the very possible scenario that growth undershoots current forecasts more spending cuts and revenue raising measures may become necessary by the autumn. These will be difficult to implement in such a low growth environment but must also be consistent with a reformed/ smaller public sector that is sustainable in the long-run.
1 See "Serbia: Balance of payments pressures moderate", May 14th 2009