The International Monetary Fund (IMF) delegation recently concluded discussions in Belgrade, emphasizing the significance of prudent fiscal management and transparent investment practices within Serbia’s development plan, “Leap into the Future – Serbia 2027.”
Headed by Donal McGettigan, the delegation affirmed an agreement with Serbian authorities on the conclusion of the third review within the Stand-by Arrangement (SBA). McGettigan underscored the positive macroeconomic outcomes within the program, citing growth recovery, solid fiscal positioning, ongoing disinflation, record-high foreign exchange reserves, and a robust labor market.
Regarding the “Leap into the Future – Serbia 2027” plan, McGettigan acknowledged the substantial increase in public infrastructure investments. However, he stressed the importance of prudent fiscal management and medium-term investment planning. While advocating for low fiscal deficits to consolidate gains in curbing public debt, McGettigan urged careful prioritization and phased implementation of additional investment spending.
The IMF also recommended increasing investment transparency and fully operationalizing the public investment management framework to enhance the quality of investments. McGettigan noted that the fiscal deficit of 2.2 percent of GDP for 2024 aligns with arrangement obligations and advised utilizing excess revenue and underutilized contingency reserves for increased capital spending, including projects related to EXPO 2027.
Addressing risks to Serbia’s economic prospects, the delegation highlighted geopolitical uncertainties, particularly in energy, and global financial market instability. Despite these risks, McGettigan noted Serbia’s significant protections, including strong foreign exchange reserves, low public debt, sustainable external debt dynamics, and a well-capitalized banking system.
The IMF emphasized the importance of continuing reforms in the energy sector, particularly in Electric Power Industry of Serbia (EPS) and state enterprises. McGettigan welcomed commitments to remove energy price controls for the unregulated sector and stressed the need for revisions to pricing systems to ensure the financial viability of state-owned energy companies.
The delegation urged tangible changes in EPS’s operations, emphasizing the importance of implementing the EPS restructuring plan. Additionally, they emphasized the importance of implementing the Law on the Management of State-Owned Business Companies and prioritizing the completion of necessary internal structures for its operationalization by September 2024.
