Serbia seeks IMF backing for pay, pensions hike before possible election

BELGRADE (Reuters) - Serbia will seek the backing of the International Monetary Fund to raise pensions and public sector wages during a loan review beginning on Thursday, with the government hinting at a snap election early next year.

The conservative-led government of Prime Minister Aleksandar Vucic cut pensions and wages late last year as part of a belt-tightening drive to clinch a 1.2 billion-euro ($1.3 billion) standby loan deal with the IMF.

Vucic now says he plans to reverse the cuts, though perhaps not fully, given better-than-expected results of fiscal consolidation.

He says the IMF is in favour, though the lender, after its first review of the loan, said that "any fiscal over-performance should be used to reduce the high public debt." The IMF has not directly addressed Vucic's pay and pensions pledge.

Public debt in July stood at 72.3 percent of gross domestic product, higher than the IMF recommends for similar emerging economies.

Vucic's government has embarked on a drive to cut back the bloated public sector and offload loss-making state enterprises in order to stabilise the Balkan country's finances.

Vucic says the general government deficit, which does not include municipal finances or spending on some state companies, is now set to come in at 2.75 percent of output, far below the planned 4.75 percent.

In office since April 2014, Vucic hinted on Wednesday that he was considering calling a snap election, confident of winning a new four-year mandate given his personal popularity and general disarray in the opposition.

"Fiscal consolidation, ... one of three pillars of the deal with IMF, is going on fairly well; we have results that are better than expected," Nebojsa Savic, the head of the governor's council at the Serbian central bank, told state television on Thursday.

He said one possible stumbling block in the IMF review may be the restructuring of hundreds of state-run firms, a legacy of socialist Yugoslavia.

"We have some delays there, but one must bear in mind that these companies have huge problems accumulated over many decades," Savic said.

The IMF review will run until Sept. 1, led by James Roaf, the Fund's regional representative for Central and Eastern Europe.

($1 = 0.8980 euros)

(Reporting by Aleksandar Vasovic; Editing by Matt Robinson/Ruth Pitchford)

WhatsAppFacebookTwitterLinkedinBeloudBluesky