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IMF says Serbia mission a "health check", not loan talks

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(Globalpost/GlobalPost)

By Aleksandar Vasovic

BELGRADE (Reuters) - The International Monetary Fund will not discuss a fresh loan deal on a mission to Serbia starting this week, it said on Tuesday, describing the visit as a "health check" of the Balkan country's economy.

Serbia's government says it wants a precautionary loan deal with the Fund, to restore relations after the collapse of a previous 1 billion euro ($1.3 billion) arrangement last year and a row over the independence of the central bank.

The IMF's representative to Serbia, Bogdan Lissovolik, said in an e-mailed statement that the delegation would not discuss the request during its routine 3-week mission starting on Wednesday.

But he said the "discussions may offer a useful opportunity to reflect on the reform agenda and discuss what may be needed for a potential program."

Analysts say investors would welcome the security of an IMF loan deal to help stabilize Serbia's finances, a further fillip to the economy after Belgrade last month won a preliminary agreement for the start of EU membership talks this year.

Without IMF support, the World Bank has said it will withhold a $400 million loan to support the Serbian budget.

Belgrade economics lecturer Djordje Djukic said Tuesday's IMF statement risked stirring "negative sentiments" among investors looking at Serbia. "A precautionary deal could serve as a framework to discipline Serbian finances," he told Reuters.

Serbia's budget deficit ballooned to some 6.7 percent of national output last year and public debt hit 60 percent.

The country has since halved its forecasted budget deficit to 3.6 percent this year, while a restrictive course set by the central bank has soothed fears of government interference.

The economy contracted 1.7 percent last year, but bounced back in the first quarter of 2013 with growth of 1.9 percent. The government hopes investment in infrastructure and energy, an improved harvest and rising exports from its joint car venture with Italian automaker Fiat <FIA.MI> will sustain this pace.

Timothy Ash, head of emerging markets research at Standard Bank, described the IMF statement as "disappointing".

"I guess the (Serbian) government is flush with Eurobond financing and Russia loans and hence is playing hard ball with the Fund," he said.

Serbia needs about 4.8 billion euros this year to service its debt. It sold a $1.5 billion Eurobond this year and last month secured a $500 million loan from Russia.

(Reporting by Aleksandar Vasovic; Editing by Ruth Pitchford)

http://www.globalpost.com/dispatch/news/thomson-reuters/130510/imf-says-serbia-mission-health-check-not-loan-talks