World Bank to approve $800 mln to Serbia in 2013-14

BELGRADE Thu Dec 6, 2012 8:40am EST

BELGRADE Dec 6 (Reuters) - The World Bank will approve a total $800 million to Serbia over the next two years for budget support, investments and reforms, the Tanjug news agency reported on Thursday citing the lender's country representative.

The Serbian economy will contract this year to about two percent of gross domestic product (GDP) on declining trade and investment from the crisis-hit euro zone and a harvest hit by drought as most of the Western Balkans.

The country expects public debt to peak in 2013 at 65.2 percent of GDP and its revised budget deficit this year is seen at around 6.2 percent of GDP. Inflation, spurred by food prices and an increase of value-added tax rose to 12.9 percent in October.

"The World Bank will in 2013 approve $300 million for the budget and $150 million for projects," Loup Brefort, the World Bank's country resident representative was quoted as saying by Tanjug.

The lender is also ready to approve another $200 million as budget backing for 2014 and another $150 for investments, Brefort said.

Since the ouster of late strongman Slobodan Milosevic in 2000, the World Bank has disbursed a total of about $2 billion to the Balkan country.

Last week the Serb parliament adopted the 2013 budget, setting a deficit target of about 3.3 percent and a growth target of 2 percent.

The Serbian nationalist-Socialist government is also seeking a fresh three-year precautionary deal with the International Monetary Fund and talks are tentatively expected early next year.

The IMF froze its previous 1-billion euro ($1.31 billion) standby loan deal with Belgrade earlier this year due to broken spending and borrowing promises.

It said that Serbia's 2013 spending plans are overly optimistic and the World Bank has forecast more modest growth in 2013 at 1.5 percent.

Serbia's 2013 borrowing plans include a $2 billion Eurobond and a 500 million euro loan for small and medium-sized firms from the Luxembourg-based European Investment Bank. It has also sought $2.8 billion in sovereign loans from Russia and China.

($1 = 0.7652 euros) (Reporting by Aleksandar Vasovic; Editing by Ron Askew)