Progress in implementing reforms to large and inefficient state-owned enterprises in Serbia remains crucial, said the International Monetary Fund (IMF) mission, which today concluded negotiations with Serbian representatives on a new two-and-a-half-year advisory arrangement.
“Quick resolution of excessive reliance on acting directors in state-owned companies remains crucial. The transformation of Elektroprivreda Srbije (EPS) into a joint stock company and the division of Srbijagas should be completed without further delay. We also look forward to the rapid privatization of Petrohemija to revitalize the company and reduce fiscal risks,” the IMF said in a statement.
It added that improving the business environment would help attract foreign and domestic investment, and that reforms aimed at strengthening the rule of law, improving the efficiency of the judicial system and combating corruption are key to improving the investment climate.
“Efforts to combat the informal economy need to continue, including strengthening e-fiscalization and extending the seasonal employment regime in agriculture to other sectors. Finding a quick solution to the growing number of lawsuits against banks challenging the legality of loan processing and insurance fees of housing loans would strengthen the financial sector and improve the business climate,” the IMF said.
It was pointed out that the development of domestic capital markets as well as further encouragement of dinarization would improve financial stability and medium-term growth.
“Promoting green growth and improving social protection systems would support recovery and ensure more sustainable development. Investments in green infrastructure and the transition to a reduced carbon future can support job creation, while increasing economic and environmental resilience. Strengthening existing social protection programs would help in protecting vulnerable groups, reducing inequality and fighting poverty,” the IMF said in a statement.
The IMF’s recommendation is that any further state support during the pandemic be directed more directly to the most vulnerable households and companies and the sector most affected.
The IMF believes that some measures of state aid to the economy and citizens envisaged by the budget revision could have been better targeted.
“Well-designed investments in infrastructure and environmental protection can support short-term growth and limit the potential severe effects of the crisis,” the IMF said, adding that reducing the budget deficit, boosting capital spending and curbing current spending would reduce public debt but affect investor confidence.
According to the IMF, it is necessary to gradually reduce the share of total public sector wage costs in GDP, after a sharp increase in 2020, while pensions should continue to be indexed in accordance with the Swiss formula.
“Further progress in Tax Administration reform, strengthening public investment management and careful monitoring and management of fiscal risks, including from state-owned enterprises, would strengthen the fiscal framework. Faster structural and institutional reforms are needed to ensure faster, inclusive and sustainable growth in the medium term of period,” the IMF said in a statement, Novi Magazin reports.
