IMF Executive Board Completes Second Review Under Serbia’s Stand-By Arrangement and Approves €349.6 Million Disbursement

Washington DC, December 24, 2009 ( Source: IMF Press Release) - The Executive Board of the International Monetary Fund (IMF) completed on Wednesday the second review of Serbia’s economic performance under a program supported by a Stand-By Arrangement (SBA). The completion of the review enables the immediate release of SDR 319.6 million (about €349.6 million or US$499.7 million), bringing total disbursements under the program to SDR 1.02 billion(about €1.12 billion or US$1.6 billion).
In completing the review, the Executive Board also granted a waiver for the non-observance of the end-September general government deficit performance criterion, and approved a modification of the end-December quantitative performance criteria in relation to the general government deficit and the 2009 inflation targets.
Serbia’s initial 15-month SBA was approved on January 16, 2009 (see Press Release No. 09/12) for SDR 350.8 million (about €384.1 million or US$548.4 million). The arrangement was extended by one year and augmented to SDR 2.62 billion (about €2.87 billion or US$4.01 billion) on May 15, 2009 (see Press Release No. 09/169) to support the government's economic program amid a sharper than expected impact from the global financial crisis.
Following the Executive Board’s discussion on Serbia, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, said: “The impact of the global financial and economic crisis on Serbia has so far been successfully contained. The authorities’ policies supported by the SBA—along with their actions to stabilize the markets—boosted international reserves, eased pressures in the foreign exchange market, and helped mobilize significant international financial assistance in support of Serbia’s budget and economic recovery. Although the decline in domestic demand has been significant, the contraction in output has been limited.
“The authorities’ program aims to help address the challenges posed by the economic downturn, and to restore sustainable public finances over the medium term. This will be crucial to continue safeguarding financial stability, and to create the conditions for a return to dynamic—yet sustainable—economic growth.“To this end, the authorities have embarked on an ambitious fiscal adjustment strategy focusing on structural spending reforms covering public administration, education, health care, and pensions. While these reforms are expected to yield significant and sustainable pay-offs, savings will accrue only over the medium term, and strengthened budget rules will be needed to contain implementation risks.
“The central bank’s monetary and exchange rate policies have been prudent, as reflected in continued disinflation. While there might be scope for further gradual easing of the monetary stance should favorable inflation developments continue, upside risks from high inflation expectations need to be monitored carefully.
“The authorities’ financial sector support program has successfully safeguarded financial stability during the market turmoil. The authorities are committed to continued vigilance in the face of high and rising non-performing loans, and to improve Serbia’s debt restructuring framework.
“Further progress will have to be achieved in the area of structural reforms, notably as regards privatization and the business environment, in order to lift Serbia’s economy on a high and sustainable growth path in the period ahead.”

Parliament approved the draft of Serbia’s 2010 budget

Belgrade, Dec. 23, 2009, The Serbian Parliament approved on Monday by a single vote the Government’s draft budget for next year. Needing a minimum of 126 votes, 127 MPs voted in favor of the bill. The representatives of the Alliance of Vojvodina Hungarians (SVM) voted against the draft, and it was uncertain even Monday morning whether the ruling coalition could scrape together the necessary number of votes to approve the budget. Two independent MP’s and Riza Halimi, representing ethnic Albanians from southern Serbia, came to the rescue of the 124 ruling coalition MPs. The draft submitted by the Government and approved by the MPs estimates income will be EUR 6.84bn, spending will be EUR 7.96bn, and the resulting deficit will be EUR 1.12bn. It remains to be voted on the 242 amendments submitted to the draft
Also on Monday the Board of Directors of the International Monetary Fund (IMF) was suppose to discuss a revision of its loan arrangement with Serbia. This meeting have been canceled due to the snow-storm which hit Washington DC area over the weekend.
According to the earlier statement from the Governor of the National Bank of Serbia Radovan Jelašić, the budget had to be adopted on Monday so the IMF Board of Directors can discuss its arrangement with Serbia. "If we miss this chance, the IMF will decide about the loan arrangement in late January," Jelašić was quoted as saying to the press.
However, Milojko Arsić, an adviser to the Prime Minister, says that all conditions were already met for IMF approval once the budget was adopted by the Government and sent to Parliament for consideration. Therefore he believes that the IMF will confirm its arrangement with Serbia. “This means that the fiscal policy would have to be in accordance with the arrangement. If the budget were not to be adopted for some reason, it would have to be adopted by a reasonable deadline in order to meet the basic elements of the IMF agreement,” he stated.
Key issues such as RSD 107bn deficit, maintaining the VAT rate and an estimated increase in the GDP of 1.5 percent have already been agreed with the IMF. There is, however, a dispute regarding freezing pensions, which constitute the largest expenditure in the budget. This issue is also one of the biggest political problems for the ruling coalition. Loosing the support of retirees who make one of the largest voting blocks in Serbia would lead to defeat in any new elections.

Time of Mladić arrest - “a very relative category" or a political bargaining chip

Belgrade, Dec. 21 2009, (Source: Beta, Serbia Today) - Interior Minister Ivica Dačić told press last week that Serbia is doing all in its power to arrest the remaining fugitives from the Hague Tribunal, according to Beta news agency.
"Serbia wants to close the issue of cooperation with the Hague Tribunal, but when that will happen is a very relative category in police and security issues and we believe those issues should not be connected, because Serbia's readiness and activity are important, in the sense that it is doing all in its power," Dačić told reporters in Parliament.
The Minister underscored that the visit of Dutch Foreign Minister Maxime Verhagen to Belgrade was a turning point in political relations. "Several big steps forward have been taken, but in the coming days Serbia will hold very careful consultations with European partners regarding its further steps," Dačić said.
He added that those further steps depended on the readiness of EU member states to respond positively to Serbia's request to apply for EU membership, so as to prevent the move from "turning into the opposite, should the potentially overlong silence of the administration raise the question of whether such moves are justified.”
We really don’t know what the phrase “so as to prevent….” means. Dacic was probably speaking in “diplomatic terms” which don’t translate literally into English. One could guess he was suggesting a connection between EU’s manifestation of a willingness to admit Serbia into membership and Serbia’s willingness to take further steps in punishing war criminals. One would think that bringing war criminals to justice is a moral issue and the legal obligation of the Justice Department of the Serbian Government in the society that present itself as open and democratic, and not a bargaining chip in the political negotiations.

Serbia will officially apply for EU candidacy on Tuesday

Belgrade, Dec. 22 2009 (Serbia Today) - Swedish Prime Minister Fredrik Reinfeldt and Foreign Minister Carl Bildt will ceremonially accept from President Boris Tadic Serbia’s application for the EU membership today at 2.30 PM in Stockholm.
Serbian Government is hoping that Spain, which apparently supports Serbian candidacy, will do everything possible to make that application formally accepted by the EU Council of Ministers until the end of March at the latest so that Serbia would try to get the candidate status until the end of the next year.
In the name of the Serbian Government President Boris Tadić and Prime Minister Mirko Cvetković signed on Saturday the application for EU candidacy. Tadić said that the decision on when the request would be considered will be made by Sweden, the country currently presiding over the EU. He pointed out that there should be no difficulty even without the arrests of Hague fugitives Ratko Mladić and Goran Hadžić because Serbia is doing everything in its power to conclude negotiations with the Hague Tribunal.
“Our program is simple; we want Serbia in the European Union,” Tadić said. After the Government‘s decision today “no one can have a questions about what direction Serbia is heading in.” He added that even though there are people in Serbia who oppose European integration, the will of the majority of citizens must be respected.
In a statement for Tanjug, Prime Minister Cvetković said that “With this decision Serbia has mapped out the route it will take in the coming period and has shown that it shares the values of European countries.” He added that the decision to apply for candidacy was the result of strenuous work by the Government.
Swedish Foreign Minister Carl Bildt showed his support for Serbia’s decision to submit the application. On his official blog Bildt said “This is a historic moment for Serbia.“ “The Serbian President is welcome in Stockholm on Tuesday to submit the application to Prime Minister Fredrik Reinfeldt,”
Reinfeldt said that Serbia has taken a historic step in deciding to apply for EU candidacy. “I will welcome Serbian President Boris Tadić to Stockholm on December 22, when he will be officially submitting the application.” EU Enlargement Commissioner Olli Rehn will attend in Stockholm for the occasion as well.

Ministry of Energy to start discussion about nuclear plants

Belgrade, Dec. 16, 2009 (Source: eKapija) - The Ministry of Energy of Serbia will suggest opening of the public and expert discussion about use of nuclear energy in the energy sector in Serbia - the Minister of Energy, Petar Škundrić, said today (December 15, 2009).

It takes minimum 12 to 15 years to finish the construction of nuclear plant from the moment the decision on its construction is made. Serbian public do not have to worry about construction of nuclear plants within next 20 years - he said to the press in the Chamber of Commerce of Serbia.

Škundrić repeated that the Moratorium on construction of nuclear plants was in effect in Serbia and that the Ministry of Energy had not been working on planning or constructing nuclear plants to the date.
The Ambassador of Russia, Aleksandar Konuzin, said on November 30th in Novi Sad that Russia offered Serbia the possibility of construction of nuclear plants.

Serbian Progressive Party leader urges new elections

Belgrade, Dec. 15 2009 ( Serbia Today) - According to the Serbian daily Vecernje Novosti, the oppositrion Serbian Progressive Party (SNS) leader Tomislav Nikolic expressed his intention soon to call for new Parliamentary elections.
“ The time is running out for the Democratic Party (DP) . I will ask for the elections to be held next year. The Parliament is illegitimate, because it does not reflect the distribution of power on the political scene,” Mr. Nikolić said.
According to him, the overwhelming victory of his Party at the local elections in the Belgrade’s municipality of Vozdovac, is the best example of the true feelings of the voters in Serbia, and the beginning of SNP road towards political victory.
He expressed his willingness to share political power with (Democratic Party) DS as a minority partner, as well as with the DSS but only if DSS leader Vojislav Kostunica stop his opposition towards Serbian European integration.
Mr. Nikolic was a leader of the conservative and nationalistic Serbian Radical Party (SRS) until last year, when in the party coup he broke away, formed a new party (SNP) and took significant number of the Parliamentary representatives from the SRS with him. The political program of the SNP is much more moderate than that of the SRS. By one, they support Serbian European integration.
As a moderate nationalist, he appeals to a large number of Serbian voters disappointed with the broken promises of the ruling coalition, abuses of power, corruption scandals and harsh economic times. It is realistic to expect that in the potential Parliamentary elections his Party would indeed win.

US Prepares Serbia for NATO Cooperation

Belgrade, Dec.10th (Source: US Embassy News) - In preparation for the recent Serbia diplomatic initiatives this month, Counselor for Public Affairs Conrad Turner spoke at the conference “Partnership for Peace Program - Opportunities for Serbia?,“ at Hotel Norcev, located in Fruska Gora.
Turner provided background to Serbian officials in attendance on how to best work with NATO by giving them background on how participating NATO forces cooperate.
“When all member countries have consulted, debated and agreed on any operation, each member country commits forces or resources according to its ability and desire. National military and civilian forces from each country, which have already trained together for months and years, unite as NATO forces, but they also wear the flag of their own country,” said Turner in his opening remarks.
Turner was quick to point out that cooperation by Serbia upon becoming NATO members will be critical from the onset.
“Consensus is NATO’s central functioning principle. In my view it is part of the glue holding the alliance together, attracting new members and ensuring old ones stay. Once consensus is understood, the rest becomes easier to understand…This means that when a "NATO decision" is announced, it is the expression of the collective will of the governments of all the member countries,” emphasized Turner.
Turner pointed out to officials that voting is not the basis for all decision making at NATO, rather members consult with each other until a decision that is acceptable to all is reached. They may not agree on all the details, but all can live with the outcome. This will require new cooperation from Serbian leadership and from within the Serbian political parties, so that Serbia can efficiently arrive out its own consensus during negotiations at NATO.
Turner underlined the fact that a newly accepted Serbia would be expected to the environment of consensus, as consensus requires greater cooperation.
“The consensus principle applies throughout every level and is in play at every meeting. Majority rule is excluded. The divisiveness it might cause can undermine the commitment to implement NATO decisions, since operations depend entirely on the good will and contributions from each member country,” said Turner.
Turner reminded those in attendance that NATO members have committed to playing an active role in the security of the entire alliance, and they have agreed to pursue the same aims, and are not focused solely on their own national interests.”
The US Councilor spoke directly to the possible reservation that might have been shared by Serbian officials in attendance by pointing out that such cooperation might sound like a “fairy tale”, but he assured them that it is a very real description of the working environment at NATO, and for this reason a commitment to shared values is a very serious requirement for membership.
Turner pointed out that Serbia as a member of the Partnership for Peace (PFP) has benefits that go beyond modernization, training and improved interoperability.
“Although PFP countries do not participate in decision-making by the 28 member-countries and do not have the same level of access to NATO information, they are better informed about opinions, policies and decisions within NATO and can also make their voices heard,” said Turner.