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IMF approves EUR 1.2 bn credit line for Serbia

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(WASHINGTON) - The International Monetary Fund on Monday approved a 1.2 billion euro ($1.4 billion) credit line for Serbia to support its structural and economic reforms.

The Serbian authorities have signaled they will treat the three-year IMF credit program as "precautionary", the IMF said.

The IMF said the program was aimed at supporting Prime Minister Aleksandar Vucics's efforts to reduce debt and budget deficits and boost the economy's growth potential and competitiveness.

"Serbia's high and rising public debt calls for fiscal consolidation in the period ahead," the IMF said. The government's fiscal package, aimed at lowering debt as a ratio of gross domestic product (GDP) by 2017, is "appropriate."

According to the Washington-based crisis lender, Serbia's budget tightening creates room for a gradual loosening of monetary policy, which will support domestic demand.

As the Serbian economy contracted in 2014 -- its third recession in the last six years -- the government budget deficit rose to 6.6 percent of GDP and public debt topped 70 percent of GDP.

IMF deputy managing director David Lipton praised the authorities "for strengthening the credibility of reform plans by taking difficult but necessary measures in 2014, including labor and pension reforms."

In October, Serbian lawmakers adopted a number of austerity measures, including a 10 percent cut in pensions and public sector monthly wages above 200 euros.

In the European country of 7.2 million people, more than 700,000 are employed in the public sector while 1.7 million are pensioners. For every person employed, there are five either receiving pensions or unemployed.

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