Serbia aims to seek new talks with IMF in September - govt economic adviser

Serbia aims to seek new talks with IMF in September - govt economic adviser

Tue Aug 20, 2013 8:57am EDT

====Will approach the IMF after appointment of new FinMin

====World Bank to support Serbia in reforming laws, overhaul of state firms

By Aleksandar Vasovic

BELGRADE, Aug 20 (Reuters) - Serbia aims to ask the International Monetary Fund next month to restart talks over a new loan deal that is crucial for reassuring investors, a government advisor said.

The IMF, which froze a previous standby loan deal with Serbia early last year, and the country's fiscal advisory body have warned that the government risks missing its revised budget deficit target of 4.7 percent of national output this year.

Serbia's public debt is seen at 65 percent of gross domestic product (GDP) this year, higher than the IMF recommends for other similar emerging economies.

Last month, the Balkan country's outgoing Finance Minister Mladjan Dinkic, unnerved investors by saying that a new arrangement with the IMF was unrealistic in 2013.

Dinkic was ousted in a government reshuffle and will be replaced by Lazar Krstic, a Yale-educated economist, who according to media will be tasked with an overhaul of Serbia's fragile finances. Parliament needs to approve Krstic's appointment at a session scheduled for Aug. 26.

"We are waiting for the appointment of the new finance minister, so I believe in September we could formally approach the IMF," Sinisa Mali, an economic advisor to the deputy Prime Minister Aleksandar Vucic, told Reuters.

"This will send investors a message that Serbia is on a reform path and on the other hand, the government will have to stick to its own reform policies," Mali said.

Serbia tapped international markets three times since last year, raising $3.25 billion since last September, or about 8 percent of GDP. It plans to issue another $1 billion Eurobond in September. Mali said that no other issues should be expected in 2013.

Serbia emerged from recession in the first quarter but needs to borrow a further 2 billion euros ($2.65 billion) this year and around 5 billion in 2014 to cover the budget gap.

Mali said that the World Bank would also support Serbia in its work on reforming laws and in the overhaul of 179 indebted state-run firms.

Prime Minister Ivica Dacic is expected to formally end a cabinet revamp early next week, to focus on creating jobs in an economy which suffers from unemployment of more than 25 percent.

His Socialist Party and their partners, the Pensioners Party, have so far opposed any attempt to freeze or cut pensions and public wages.

($1 = 0.7490 euros) (Reporting by Aleksandar Vasovic; Editing by Susan Fenton)