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External Relations | Relations with IMF | Stand-By Arrangement 2015

Republic of Serbia Successfully Concludes the Three-Year Stand-By Arrangement with the IMF

The three-year stand-by arrangement approved by the IMF to the Republic of Serbia on 23 February 2015, worth SDR 935.4 mn (around EUR 1.2 bn) was successfully concluded on 22 February 2018. By implementing the agreed economic programme, Serbia has attained the objectives concerning the achievement of macroeconomic balance, by ensuring the sustainability of public finance, improving the resilience of the financial sector and strengthening competitiveness and economic growth.
The arrangement was precautionary, meaning that Serbia had no intention to use the funds approved, unless in the case of balance of payments needs. During the arrangement, eight reviews of the agreed economic programme were conducted, which the IMF Executive Board assessed positively. The funds available were not drawn.

The results achieved under the economic programme largely exceeded the expectations. Economic activity recorded steady growth and real GDP is higher than before the world economic crisis, reflecting rising investment, exports and employment. Robust fiscal consolidation was implemented, yielding results much better than expected, owing to firm control of current expenditures and sound revenue collection. Within three years, the general government deficit turned into a surplus, thus securing a stable fiscal position and creating the basis for macroeconomic stability. Significant progress was also achieved in the field of structural reforms, strengthening the growth potential of the Serbian economy, along with job creation and a reduction in fiscal risks. Cooperation with the IMF under this arrangement also resulted in a higher FDI inflow and an upgrade in the country’s credit rating.

During the arrangement, the NBS pursued cautious monetary accommodation in the inflation targeting regime, monitoring the signals from the international environment and the domestic market, thereby giving a key contribution to the country’s economic recovery. Low and stable inflation and financial stability have been achieved, along with the relative stability of the exchange rate, all of which significantly boosted confidence in the domestic market. Interest rates on dinar borrowing were reduced, leading to a rise in lending activity and investment.

Financial sector reforms have increased the resilience of banks, bringing them into a much better position to support the real sector. The measures aimed at reducing the NPL share in total loans, implemented by the NBS in cooperation with the Government, produced excellent results – the NPL level was more than halved compared to 2015. The reforms of state-owned financial institutions are underway. The NBS has begun to implement Basel III standards, thus further reinforcing the central bank’s supervisory function, in accordance with standards of the ESCB.