IMF sought to increase budget deficit

July 06, 2009 12:35:30 PM

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Serbian Prime Minister Mirko Cvetkovic said in an interview Sunday he would request permission from the International Monetary Fund to increase the country's budget deficit beyond an agreed limit.

Cvetkovic told state-run news agency Tanjug that Serbia, hit hard by the economic crisis, would ask the IMF for permission to let its budget deficit reach 4.5 percent of GDP in 2009.

This was greater than the 3.0 percent deficit for the year, which Serbia agreed to when it took a 2.9-billion-euro (four-billion-dollar) standby loan in April from the fund.

The premier said he would make the request when fund officials visit Serbia in August.

Belgrade took a first part of the loan of 800 million euros (1,100 milion dollars) at the end of May.

Radovan Jelasic, governor of the Serbian central bank, raised fears last month that Serbia would not be able to fulfil the criteria agreed with the fund.

Cvetkovic, however, said that the country's GDP would only shrink by 3.0 percent in 2009, rather than by the 5.0 to 7.0 percent that some estimate.

Jelasic predicted a 6.0 percent contraction in May, but several weeks later said he thought the Balkan state had seen off the worst of the crisis.

Cvetkovic said: "There are positive signs, but that doesn't mean we have come out of the crisis.

"What is certain is that the economy will not recover as quickly as it contracted.

"Once it has started, the recovery will take several years," the premier acknowledged.

"We have stabilised the financial system, we have reestablished confidence in banks, we are no longer getting massive bankruptcies," Cvetkovic said.

The global financial crisis hit central and eastern European nations the hardest, and Serbia was one of several in the region that turned to the IMF to counter the flight of foreign capital.