Serbia, IMF in budget talks

BELGRADE (Reuters) – Serbia and the International Monetary Fund opened a new round of talks yesterday on the nation’s 2004 and 2005 budgets, critical for a disbursement of the fund’s next tranche of a loan expiring in mid-2005. An agreement is conditional on cutting the 2004 budget gap to 2.5 percent of gross domestic product, from some 4.0 percent in 2003, along with the adoption of a tight 2005 budget with the deficit at around 1.0 percent of GDP. Belgrade hopes the three-day talks will end with the IMF’s approval of Serbia’s macroeconomic policies and reforms. By the end of the week, Parliament should vote on a revised 2004 budget, cutting it down to levels agreed with the IMF. The minority ruling coalition of Prime Minister Vojislav Kostunica is reported to have reached a pact on votes with the Socialist Party of ex-President Slobodan Milosevic, without whose backing it is impossible to pass any law in Parliament. But the Socialists warn their support should not be taken for granted for the 2005 budget, due in Parliament in December. Finance Minister Mladjan Dinkic told deputies that failure to amend the budget would ruin Serbia’s debt deals with sovereign and commercial lenders. The Paris Club of sovereign lenders granted a staged 66 percent write-off on Serbia’s $4.5 billion debt in 2001. It wrote off 51 percent immediately, making the extra 15 percent conditional on completion of the IMF 2002-2005 loan deal. As for the London Club, which agreed in July to forgive 62 percent of Serbia’s $2.6 billion debt, the approval of the revised budget would allow the exchange of the old debt for a new 20-year, $1.08 billion eurobond to begin. «Once the exchange starts, Serbia will get its first ever credit rating. Standard & Poor’s is expected to unveil the rating soon,» Dinkic told a business forum.