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IMF caution on Serbia’s economic development plans

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The International Monetary Fund (IMF) recently completed its third review of the current precautionary arrangement, and it appears to have commended the government’s handling of economic policy. However, in their statement on the IMF’s website, they also issued a caution regarding future large-scale investments.

The “Leap into the Future – Serbia 2027” development plan foresees significant increases in public infrastructure investment in the coming years. The IMF emphasizes the importance of prudent fiscal management and medium-term investment planning. Serbia is urged to maintain a low fiscal deficit to solidify the progress made in managing public debt. While current public investments are relatively high, any additional spending must be carefully prioritized, considering project costs and benefits. The IMF calls for increased transparency in investments and a well-defined framework for managing public investments to ensure investment quality.

Mihailo Gajić, director of the non-governmental organization Libek, interprets the IMF’s message as suggesting that adherence to macroeconomic parameters such as low deficits and public debt levels reduces risks. However, he highlights the importance of caution in designing public investment systems and selecting infrastructure projects.

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Gajić notes that the lack of inclusion of many Expo-related projects in the Ministry of Finance’s medium-term fiscal plan underscores the need for better planning. While large public investments can stimulate economic growth, Gajić suggests prioritizing infrastructure projects based on economic viability and societal needs.

The IMF also acknowledges the Serbian government’s efforts to improve public sector employment planning and modernize tax administration. They stress the need for continued reforms in the energy sector, including the removal of price controls and revisions to ensure financial sustainability and support for necessary investment projects. Additionally, they emphasize the importance of a broader restructuring plan for state-owned energy companies.

Overall, while the IMF recognizes Serbia’s economic progress, it highlights geopolitical uncertainties and energy sector developments as potential risks. This underscores the importance of prudent fiscal management and strategic investment planning for sustained economic stability and growth.

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