IMF Executive Board Approves New Cooperation Programme for Serbia

At its meeting held on 18 July, the Executive Board of the International Monetary Fund (IMF) approved a new cooperation programme supported by the Policy Coordination Instrument (PCI) for Serbia.

The PCI-supported programme will build on the precautionary Stand-By Arrangement successfully completed in February 2018. It aims at maintaining macroeconomic and financial stability and advancing the structural and institutional reform agenda to foster rapid and inclusive growth, job creation and improved living standards.

The programme will last 30 months and Serbia’s progress in its implementation will be monitored through five semi-annual reviews.

The PCI is a new mechanism of support available to IMF members. It is an advisory instrument and does not envisage the use of any financial resources. The PCI is designed for countries committed to reforms and is agreed with a view to obtaining support for a specific economic programme when the country has no current or potential balance of payments problems.

The IMF Executive Board assessed that Serbia has succeeded in addressing macroeconomic imbalances and restoring confidence. Supported by a three-year precautionary SBA, Serbian authorities have restored fiscal sustainability, putting public debt on a firm downward path, and strengthened the country’s external position. Monetary policy has kept inflation under firm control, while supporting economic recovery and maintaining broad exchange rate stability. The confidence instilled by the improved macroeconomic situation has been reflected in rising investment, both from foreign and domestic sources, and has supported the economic recovery.

The IMF Executive Board emphasised that the country’s economic outlook remains positive. However, Serbia is still susceptible to spillovers from regional and global developments and market volatility. It was pointed out that delay in delivering on structural reforms, or erosion of fiscal discipline, could undermine confidence and reduce medium-term growth prospects.

The agreed programme, supported by the PCI, envisages a fiscal policy focused on further lowering of public debt, increased capital spending to address Serbia’s infrastructure needs, and some reduction of tax burden on labour and business.

The National Bank of Serbia’s monetary policy stance was assessed as appropriate in light of uncertainties in the domestic and external environment. The efforts to further strengthen the process of dinarisation will continue. As regards the financial sector, the IMF Executive Board acknowledged good performance in reducing non-performing loans, as well as the need for continued activities on this front. Other priorities include aligning financial regulatory and supervisory frameworks with EU standards, and addressing identified challenges in the AML/CFT framework.

Structural and institutional reforms under the programme are intended to improve the business environment, contributing to a successful EU accession process. These reforms will focus on the restructuring of state-owned enterprises, financial institutions and public administration, and on further suppression of the shadow economy.

Governor's Office