Serbia has also decided to ask the International Monetary Fund for additional support, according to a stament from senior government officials last Monday cited in Reuters.
“We are certainly not in a group of emergency cases, such as Hungary,” a senior official who asked not to be named told Reuters. “But we need the agreement for longer-term stability.”
So, to be clear, Serbia is not an “emergency case”, like Hungary for example – although it should be noted that the Hungarian government are stating that they are not an emergency case like Iceland, who are themselves not an emergency case, like Ukraine, for example, who are in no way to be considered as being in need of support in the way in which, let us say, Latvia is. And Latvia according to Prime Minister Ivars Godmanis is not any kind of case at all, and certainly not one to be compared with Serbia.
Well, make of all that what you will, but one thing is for sure, and that is that experts from the International Monetary Fund are going to have a role in drafting Serbiaâ€™s 2009 budget. And how do we know that? Well Serbiaâ€™s Prime Minister, Mirko Cvetkovic, told us, today. Strange isn’t it, but still, this hand in the budget drafting process should not be considered to be, bla bla bla.
Meantime Serbia’s currency (the dinar) has fallen 4 percent and the main stock indexes 30 percent in the last 10 days.
Serbia’s case is a little different from most of the others we are seeing since Serbia has only recently terminated an earlier arrangement with the IMF (which lasted from 2002-2005), and what is involved really is agreeing to a renewal of the previous arrangement, a move which the Serbian central bank had already been urging on the government in an attempt to improve Serbia’s credit rating. Since any IMF terms for additional support will likely result in tighter budgetary constraints, this is also to the central bank’s liking, since central bank Governor Radovan Jelasic has been a strong critic of recent government fiscal policy.
Only last month the IMF urged Serbia to aim for a balanced budget in 2009, to restrict public spending, to tame inflation and to cut its current account deficit from the present 18.5 percent of GDP to 10 percent in the medium term.
One local Serbian personality is, however, reported to be working on a formula which he feels might help his country in these difficult times. World Testicle Cooking Festival champion Ljubomir Erovic is apparently seizing the moment to spread his enthusiasm for his favourite food by issuing a new recipe book.
“I wanted to make something that we could be known by…to make a Serbian brand, not to be famous only for bombs, sanctions or corruption,” Erovic said at a friend’s inn in the wooded hills of central Serbia. Erovic’s electronic cookbook subtitled “Cooking with Balls” offers suggestions on how to cook on a grill or stove with various spices such as fresh rosemary, yarrow, thyme and basil, grapes and wine.
Sounds like something out of a Kusturika movie, doesn’t it?
Those of you with the stomach for reading something just a little bit stronger than testicle stew recipes, and with the curiousity to learn why it might be that what we are seeing happening now in Serbia was more or less inevitable, should enjoy reading my Serbia, Must What Goes UP Really Come Down post, written at the time of last November’s elections.
Reuters have also published a very useful fact dossier on Serbia.
* Investor worries about whether Serbia would opt for a nationalist or pro-EU government drove the dinar to its lowest so far this year, at 83.8674/euro, shortly before the May election. * The election of a pro-Western government, followed by the July arrest of former Bosnian Serb President Radovan Karadzic and his handover to the Hague war crimes tribunal, reassured investors of Serbia’s commitment to complete cooperation with the tribunal, the key obstacle to speedier EU accession, sending the dinar to its record high of 75.75/euro.
* The dinar was trading at around 82.3/euro on Oct. 17, down around four percent so far this year, as the global financial crisis heightens investor awareness of emerging market risks.
* Serbia runs a managed float regime for the dinar, also called a “dirty float” where central bank intervention is generally against big daily exchange rate swings.
* The dinar is “semi-convertible” as the government still keeps some capital account restrictions for individuals, but allows Serbian companies to invest abroad.
* The current account surged in January-August this year to $6.16 billion or 18.5 percent of GDP from 16 percent in 2007.
* Serbia’s 2007 GDP was estimated at $41 billion and was expected to rise to $50.2 billion this year.
* The IMF has advised Serbia to cut the current account deficit to below 10 percent of GDP in the medium term.
* The current account gap is driven by the trade deficit, which hit $7.7 billion in the first eight month of the year.
* Serbia spends most on crude oil and natural gas imports, while its main export revenue comes from steel, sugar, machine parts and car tyres.
* Serbia’s foreign debt stood at $29.7 billion at the end of July. Private sector debt accounts for $20.3 billion and the rest is official debt to international creditors.
* Central bank statistics showed banks owed $3.7 billion and other corporates $14.5 billion in medium-to-long term debt. Banks had $1.3 billion in short-term debt and companies $728 million.
* Official hard currency reserves have been stable and were last reported in September at $13.9 billion. They stood at $14.2 billion at the end of 2007.
* Eighty percent of the reserves are in euro-denominated assets. The bank keeps 24 percent in deposits with other central banks and commercial banks with AAA or AA ratings; 72 percent in foreign securities; and 4 percent in gold, cash and special drawing rights.