Serbia knocking on IMF door

It’s reported today from Belgrade that the government of Serbia intends to ask the IMF for a fairly substantial program loan of around $2 billion (which would be a scaling up of a precautionary $500 million facility already in place).  One striking thing about the rationale for the request is the speed in deterioration of prospects that it signifies.

We’ve known from Edward’s posts here that things are getting very bad quickly, but consider that just one month ago, the Fund was still projecting 3.5% growth for 2009 and 4.5% for 2010; the office of Prime Minister Mirko Cvetkovic now seems to think that 2009 growth will be barely positive, and the budget position correspondingly worse.  In fairness, Serbia’s budget deficits don’t look that bad (2-3% of GDP) but the current account gap is huge and the still pervasive role of the state in the economy means that it’s tough to find things that can be quickly cut.   Incidentally, the country apparently remains committed to the Corridor 10 road project (or Alexander of Macedon Highway according to FYR Macedonia) with Greece putting up some of the cash — notwithstanding the fact that Greece shows up on lists of countries that might be looking for help of its own soon.

Finally, since this request would seem to shave another $2 billion of whatever headroom the IMF thought it had for such programs, getting them more space to lend might soon be a priority agenda item at the London Summit.

3 thoughts on “Serbia knocking on IMF door

  1. Pingback: IMF Rapidly Expanding Its Balance Sheet | afoe | A Fistful of Euros | European Opinion

  2. Serbia is reported to spend 500 million Euros per year on supporting the parallel Serb structures in Kosovo, i.e. paying the salaries for employees that refuse salaries from the Kosovar government and other ‘projects’.

    So, your statement that…

    “…it’s tough to find things that can be quickly cut.”

    … might be somewhat incorrect. IMF should condition any loans on cuts to this ridiculous fund for creating what EULEX sees as problems in Kosovo.

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