ECONOMY

Serbia rejects IMF budget cut demands as ‘ridiculous’

BELGRADE (Reuters) – Serbia cannot meet tough International Monetary Fund calls for a smaller budget deficit because it has not received promised cash from Western donors, Deputy Prime Minister Miroljub Labus said yesterday. The IMF wants Serbia to slash next year’s budget deficit to 10 billion dinars ($164.25 million), or about 1 percent of gross domestic product, to stem buoyant consumer demand that in turn is fueling the country’s growing trade gap. But a day before an IMF team completes a fourth review of a three-year, $889 million loan program that expires in mid-2005, Labus made it clear the conservative minority government would not pursue unpopular spending cuts. «They demand the budget deficit be reduced to 10 billion dinars next year. That is ridiculous,» he told reporters on the sidelines of a discussion on government reform plans. «When we signed this agreement in 2002, they promised three donor conferences for Serbia and $4.5 billion in aid. We had one donor conference and $1.5 billion. I told (the IMF) not to ask for the impossible and I asked for the missing $3.0 billion instead,» said Labus, a liberal economist who supports close ties with the West. The economy has rebounded strongly this year but mainly as a result of rising wages and domestic consumption, fueling inflation. Labus said he hoped foreign direct investment would help alleviate the current account deficit.