IMF delay does not detract from improving story
Overview:
The recent IMF Mission to Serbia left without concluding negotiations on the second review of the Stand-By Arrangement (SBA). Talks on the second and third reviews will be held together in October. The delay in disbursements reflects the government’s failure to increase VAT or otherwise identify measures to fill a potential budget financing gap next year. However, program implementation is otherwise sound and the IMF has agreed to a larger fiscal deficit for this year. Moreover, the government is drawing up a set of structural reforms that could finally yield a more sustainable and efficient public sector although implementation of these plans will be difficult politically. The economic downturn is showing the first signs of bottoming out and the financial sector has ridden out the crisis extremely well.