The International Monetary Fund (IMF) said on Monday that its Executive Board concluded the Second Review Under the Policy Coordination Instrument (PCI) for Serbia.
It said that the Serbian authorities acted swiftly to deal with new shocks which appeared with the Russian invasion of Ukraine and rising inflation. “Faced with these new shocks, the authorities acted swiftly to preserve financial stability, help companies navigate the international sanctions regime and supply chain disruptions, mitigate the pass-through of high global commodity prices through regulation, and provide financing for energy imports. The authorities have also started to secure energy supply and address the medium-term reform needs in the energy sector. Thus far, higher than budgeted tax revenue has covered the new spending measures. The monetary policy rate has been increased three times since April in response to continued high inflation,” the press release said.
It said that risks to the near-term outlook remain elevated and mostly to the downside and added that policy priorities shifted to supporting the economy in a crisis situation, while the economic policy objectives supported by the PCI remain an appropriate anchor. “Provided that global inflation moderates, inflation should return to within the National Bank of Serbia (NBS) target band over the medium term,” the press release said.
It quoted Kenji Okamura, Deputy Managing Director and Acting Chair of the Executive Board as saying that “Serbia has demonstrated its resilience during the Covid-19 pandemic, but the war in Ukraine, high inflation, and the energy crisis pose new challenges … Structural reforms should continue to underpin medium-term growth. The new fiscal rules, expected to be launched with the 2023 budget, will provide an important anchor for medium-term fiscal discipline. The planned primary dealer system will support capital market development.”
Serbian Finance Minister Sinisa Mali said that a large number of the goals set in the arrangement have been met and added that reforms are being continued. “Despite the challenges that the pandemic brought we have mainly implemented the obligations in terms of structural reform plans and that was confirmed by the IMF Executive Board,” a ministry press release quoted him as saying. The minister said that preserving macro-economic and financial stability with support to economic growth remain priorities.
“Public finances are completely stable and we are continuing to achieve good economic results despite the global economic crisis… We achieved economic growth of 4.4 percent of the GDP in the first quarter and expect growth of four percent in the second quarter,” the minister said adding that the goal is to limit the fiscal deficit to three percent of the GDP. He said that a new set of fiscal rules is being drawn up in consultation with the IMF, including a new fiscal rule on the debt and deficit to secure long-term fiscal sustainability.
