IMF agrees 518 mln dlr line of credit with crisis-hit Serbia
2008-11-17

Category International Monetary Fund Nations Serbia Category Regions Regions Europe People George W. Bush Event Global Financial Crisis Source (AFP)

WASHINGTON (AFP) - The International Monetary Fund has agreed a 518 million dollar line of credit for Serbia to help the country weather the global financial crisis, IMF chief Dominique Strauss-Kahn has said.

Strauss-Kahn said in a statement Monday the proposed 15-month standby arrangement would be available for Serbia to draw on if needed amid the financial turbulence.

He noted the loan agreement was made under regular procedures and not the streamlined emergency process available to countries struggling with the worst financial crisis since the Great Depression.

"The global financial turmoil has begun to spill over to Serbia, and this abrupt shift in the international environment is likely to slow down credit flows and economic activity across the region," Strauss-Kahn said.

"While the banking sector's capital and liquidity buffers are substantial and should help weather the financial headwinds, strong policies will be important to maintain investor and market confidence.

The IMF managing director said the agreement reached by an IMF staff mission and the authorities of the government of Prime Minister Mirko Cvetkovic was subject to approval by IMF management and the executive board.

"In view of Serbia's comfortable international reserve position and continued access to external financing, the arrangement is being considered under regular, not exceptional, procedures and access limits," Strauss-Kahn said.

"The Serbian authorities do not intend to draw on the resources made available under the arrangement unless the need arises."

Strauss-Kahn said the proposed stand-by arrangement was designed to support "a strong and comprehensive program" designed by Serbian authorities "aimed at maintaining macroeconomic and financial stability."

Hard hit by capital flight amid the global financial turmoil, Serbia has downgraded its economic growth forecast for 2009 to 3.0 percent from an earlier estimate of up to 7.0 percent.

The IMF mission helped the Serbian government draft a 2009 budget which anticipates a maximum deficit representing 1.5 percent of gross domestic product (GDP). The 2008 budget deficit was 2.7 percent of GDP.

The government measures also include structural reforms to boost the economy's growth and export potential, Strauss-Kahn said.

World stock markets dismissed a weekend Group of 20 financial crisis summit in Washington, convened by US President George W. Bush to address the worst financial crisis since the Great Depression.

Investors and analysts appeared unimpressed with a pledge Saturday by the leaders of the G20 industrialized and emerging economies to cooperate to galvanize growth and overhaul the world's financial architecture.

The group stopped short of announcing specific steps such as coordinated stimulus spending.