Having approved a Stand-By Arrangement (SBA) for the Republic of Serbia at a meeting held on 19 December, the IMF Executive Board gave an assessment of Serbian policy responses to date and their expectations regarding the SBA.

The new SBA supports the agreed two-year economic programme for Serbia. It was approved at 290% of our country’s quota at the IMF, or around 1.89bn of special drawing rights, which amount to some EUR 2.4bn. One part of the total amount will be drawn in 2022 and 2023, while the rest will be treated as precautionary.

Building on the results achieved and the reform agenda, the new SBA with the IMF has replaced the ongoing Policy Coordination Instrument, with appropriate macroeconomic policy modifications for the current global challenges. The objectives of Serbia’s SBA-supported economic programme for 2023–2024 include: preservation of macroeconomic and financial stability; additional support to financing the ongoing and potential balance of payment and fiscal needs amid challenges in the global economic environment and continued strengthening of the domestic economy and its resilience through implementation of structural reforms, particularly in the energy sector.

In deciding on SBA approval, IMF executive directors assessed that Serbia has built a strong track record of solid macroeconomic performance, supported by the IMF under the Policy Coordination Instrument (PCI). They also concluded that Serbia’s economy rebounded quickly from the Covid pandemic, and that the authorities embarked on a well-paced consolidation path to rebuild buffers. While they cite global inflationary pressures, a weak outlook for trading partner growth, and higher energy prices as the key risks, they also note Serbia’s still-strong macroeconomic policies. They further state that the Serbian authorities have already put policies in place to mitigate these shocks, but also that the current conditions require additional buffers, on which policymakers are working and will receive support from SBA. The IMF executive directors assess that amid spillovers of global inflationary pressures the monetary policy was tightened timely and appropriately, as well as that restrictive monetary and fiscal policies are needed in order to keep inflation in check and maintain relative stability of the dinar exchange rate.

Under the 2022-2024 macroeconomic framework for Serbia, the IMF Executive Board envisages improvement in all areas, evident in the gradual return to the pre-pandemic growth path, further strengthening of fiscal indicators with a sustained high level of capital investment, the expected curbing of inflationary pressures and strengthening of the country’s external position.

Source: NBS, Momentum