Serbia, IMF start talks over new, non-financial arrangement

FILE PHOTO: Serbian President Aleksandar Vucic speaks during the opening ceremony of the 21st International Economic Fair in Mostar, Bosnia and Herzegovina, April 10, 2018. REUTERS/Dado Ruvic

BELGRADE (Reuters) - Serbia and the International Monetary fund have started talks on a new support arrangement under which the European Union membership candidate will pursue reforms to boost economic growth, the central bank said on Monday.

The Balkan country successfully completed a 1.2 billion-euro ($1.5 billion) three-year loan program with the Washington-based lender in February, without drawing on the funds.

The new deal would be supported by a Policy Coordination Instrument (PCI), a non-financing arrangement introduced by the IMF to provide a framework for policy advice and monitoring in countries which do not need IMF financial support.

“The new arrangement should secure ... macroeconomic and financial stability and support the continuation of necessary structural reforms with an aim of achieving stronger and sustainable growth,” the bank said in a statement.

The talks will last until May 18, the bank said.

The IMF mission, led by James Roaf, is expected to meet top Serbian officials including President Aleksandar Vucic and Prime Minister Ana Brnabic.

To secure growth, European Union membership candidate Serbia needs to tackle its gray economy, increase public and private investments, strengthen fiscal institutions and ensure financial sector support for growth.

Serbia’s economy expanded 2 percent in 2017, affected by a drop in electricity output and a poor harvest. The economy is forecast to grow 3.5 percent this year.

The previous deal with the IMF, signed in February 2015, committed Serbia to austerity measures to reduce debt and deficit, including cuts in public sector wages and pensions.

Reporting by Aleksandar Vasovic; Editing by