The Executive Board of the International Monetary Fund (IMF) on June 26, 2015 completed the first review of Republic of Serbia’s economic performance under the Stand-By Arrangement (SBA). Completion of the review will make available the cumulative amount of SDR 304 million (about €380 million). The Serbian authorities have indicated their intention to continue treating the arrangement as precautionary. The decision was taken without a formal meeting¹.

The program is broadly on track. All end-March 2015 performance criteria and indicative targets were met with comfortable margins. All end-March structural benchmarks were implemented, although with a delay, and all prior actions were met.

The economy has stabilized, on the back of lower oil prices and stronger than expected trading partner growth. Inflationary pressures remain subdued. The external position has strengthened. Despite monetary easing, credit growth remains sluggish and non-performing loans (NPLs) continue to rise. Risks to the program come from possible spillovers from regional developments and increase in market volatility, as well as delayed implementation of structural reforms.

The original program targets remain appropriate and any fiscal over-performance should be used to reduce the high public debt. The gradual monetary easing should continue, given the still low inflation and ongoing fiscal consolidation. Pursuing the broad financial sector agenda is crucial to strengthen financial stability, and a comprehensive strategy to resolve the high NPLs is needed for economic recovery and reducing financial vulnerabilities. Some progress has been made in advancing structural reforms. A sustained reform effort, particularly for state-owned enterprises with the goal of reducing state aid and containing fiscal risks, will be key for the success of the program and for achieving stable long-term growth.

The Executive Board approved the 36-month, SDR 935.4 million (about €1.2 billion) SBA for Serbia on February 23, 2015 (see Press Release No. 15/67).

¹ The Executive Board takes decisions under its lapse-of-time procedures when it is agreed by the Board that a proposal can be considered without convening formal discussions