Mr Strauss-Kahn said in a statement the proposed 15-month standby arrangement would be available for Serbia to draw on if needed amid the financial turbulence.

He noted the loan agreement was made under regular procedures and not the streamlined emergency process available to countries struggling with the worst financial crisis since the Great Depression.

'The global financial turmoil has begun to spill over to Serbia, and this abrupt shift in the international environment is likely to slow down credit flows and economic activity across the region', Mr Strauss-Kahn said.

'While the banking sector's capital and liquidity buffers are substantial and should help weather the financial headwinds, strong policies will be important to maintain investor and market confidence'.

The IMF managing director said the agreement reached by an IMF staff mission and the authorities of the government of Prime Minister Mirko Cvetkovic was subject to approval by IMF management and the executive board.

'In view of Serbia's comfortable international reserve position and continued access to external financing, the arrangement is being considered under regular, not exceptional, procedures and access limits', Mr Strauss-Kahn said.

'The Serbian authorities do not intend to draw on the resources made available under the arrangement unless the need arises'.

Mr Strauss-Kahn said the proposed stand-by arrangement was designed to support 'a strong and comprehensive programme' designed by Serbian authorities 'aimed at maintaining macroeconomic and financial stability'.

Hard hit by capital flight amid the global financial turmoil, Serbia has downgraded its economic growth forecast for 2009 to 3.0 per cent from an earlier estimate of up to 7.0 per cent.

The IMF mission helped the Serbian government draft a 2009 budget which anticipates a maximum deficit representing 1.5 per cent of gross domestic product (GDP). The 2008 budget deficit was 2.7 per cent of GDP.

The government measures also include structural reforms to boost the economy's growth and export potential, Mr Strauss-Kahn said.

World stock markets dismissed a weekend Group of 20 financial crisis summit in Washington, convened by US President George W. Bush to address the worst financial crisis since the Great Depression.

Investors and analysts appeared unimpressed with a pledge on Saturday by the leaders of the G20 industrialised and emerging economies to cooperate to galvanise growth and overhaul the world's financial architecture.

The group stopped short of announcing specific steps such as coordinated stimulus spending. -- AFP