IMF, Serbia to discuss new loan deal in March: IMF

BELGRADE (REUTERS) - The Inernational Monetary Fund said it will visit Serbia from late February to mid-March to discuss a new precautionary loan deal with Belgrade, after freezing a previous arrangement due to the government's failure to cap spending and the public debt.

Serbia, which begins European Union accession talks in Brussels on Tuesday, wants a back-up deal with the International Monetary Fund to reassure investors as it expects growth to slow to about 1 per cent this year from some 2 per cent in 2013.

"An IMF mission, led by Zuzana Murgasova, will visit Belgrade during February 26-March 13 to initiate discussions on a possible IMF-supported program," Mr Daehaeng Kim, the Fund's representative in Serbia, said in an e-mailed statement on Tuesday.

The Washington-based lender froze its previous 1 billion euro (S$1.73 billion) loan deal with Belgrade in 2012 due to overspending and rising debt.

Serbia's 2014 budget is based on a projected shortfall equivalent to 4.6 per cent of GDP, down from 4.7 per cent in 2013.

But spending by local administration, state subsidies and guarantees could push the consolidated deficit to 7.1 per cent of GDP.

The country must also secure about 5.6 billion euros this year to cover its gross borrowing needs.

Earlier this month, Aasim Husain, deputy director of the IMF's European department, said Serbia had made progress in controlling its 2014 budget but needed to do more to ensure fiscal stability in 2015 and 2016.

To cut spending, the government aims to trim wages in the public sector, which employs 740,000 people - about 10 per cent of the population. But some analysts have warned that the 2014 budget ducks tough cuts the government pledged last September.

Serbia is rife with speculation that the Serbian Progressive Party (SNS), the biggest in the ruling bloc, is considering calling early elections for mid-March as it is riding high in opinion polls.

Several senior party officials have said that a new and stronger mandate would help accelerate the pace of reforms and that a decision on whether to hold snap elections could be reached this week.

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