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Serbia, IMF extend talks for few more days - govt sources

  Serbia asked the IMF on Monday to stay for a few more days in Belgrade until agreement is reached on the phrasing of the government’s 2009 belt-tightening plan that could lead to a freeze in real wages and pensions.

 

The IMF mission, which was originally due to leave Belgrade on Nov. 9, has already extended its visit for two days as the government tries to work out the best way to cut spending, without hurting the poorest. “Talks ended without any agreement,” a senior government official told Reuters. “They will apparently stay until we work out what happens to pensions and wages next year now that the government has to revoke the 10% increase in pensions.”

Serbia had called the IMF to help it draft a belt-tightening 2009 budget and officials said Belgrade was looking for a stand-by deal, even though there were no immediate plans to draw IMF funds unless investment and credit ground to a halt. The deal, they say, could help Serbia rebuild investor confidence as it struggles to draw enough investment and credit to finance a current account gap of 18.5% of GDP.

The IMF expects Serbia to cut the 2009 fiscal gap to 1.5% of GDP from this year’s 2.7%, mainly through pension and wage cuts. “One proposal is to allow some nominal rise in wages and pensions, but there will be no real increase,” the source said.

The IMF has asked Serbia to amend its budget, including revoking a 10% pension hike that the government had endorsed last month to partially meet a promise made to the Pensioners Party, the kingmakers who joined the cabinet in exchange for a pledge to boost pensions to 70% of average wages. “The new deadline is Thursday and we seem to be getting closer and closer to the agreement,” another top official said. “But we still have to work out some more savings.”

The IMF advice to give up the pension hike or else freeze public sector wages next year has split the ruling coalition of pro-Western parties and the Socialists of late autocrat Slobodan Milosevic. Prime Minister Mirko Cvetkovic said on Friday the impact of the global crisis meant 2009 growth would be 3.5% at most. The government had previously already cut its original 6.0% GDP growth forecast to 4.0%. (Reuters)