Relations with the International Monetary Fund

Serbia’s membership in the IMF

The former Socialist Federal Republic of Yugoslavia (SFRY) was one of the participants in the United Nations Monetary and Financial Conference at Bretton Woods (1944), as well as one of the founding countries of the International Monetary Fund (IMF) and the World Bank (WB). On 14 December 1992, the IMF Executive Board recognised the dissolution of the SFRY and terminated its membership in the IMF, while at the same time determining the conditions to be met by successor states in order to join the IMF and succeed the membership of the SFRY. The Federal Republic of Yugoslavia received a 36.52% share in the assets and liabilities of the SFRY in the IMF.

On 20 December 2000, the IMF Executive Board took a decision coming into effect retroactively on 14 December 1992 (Press Release No. 00/75) that the FR Yugoslavia had met the conditions required for joining this institution.

After the Republic of Montenegro seceded, the Republic of Serbia inherited the international legal personality of the former State Union of Serbia and Montenegro and continued its membership in international financial organisations.

On 21 July 2006, the IMF confirmed that the Republic of Serbia is the continuing state of the former State Union of Serbia and Montenegro (Press Release No. 06/161), as well as that it continues its membership with the existing quota of SDR 467.7 million and retains all rights and obligations stemming from this membership.
The Governor of the NBS serves as the Serbian Governor to the IMF, while a Vice-Governor of the NBS serves as the Alternate Governor to the IMF.

The Republic of Serbia has been a member of the Swiss constituency, a voting group through which it exercises its voting power in the IMF and the WB since December 2000. This constituency is composed of Switzerland, Poland, Serbia, Turkmenistan, Kazakhstan, Azerbaijan, the Kyrgyz Republic, Tajikistan and Uzbekistan. In 2009, a meeting of the Swiss constituency members was held in Belgrade.

Regular cooperation between the Republic of Serbia and the IMF is conducted in the form of annual consultations under Article IV of the IMF Articles of Agreement. These consultations represent a statutory obligation of its members, based on which the IMF assesses the economic situation in a country and the adequacy of its economic policy measures.

Serbian quota increase in the IMF

The IMF’s comprehensive quota and governance reforms entered into force on 26 January 2016, which allowed for a doubling of IMF quotas under the 14th General Review of Quotas and a major shift in quota shares of the IMF members (Press Release No.16/25).

On 10 February 2016, Serbia settled its obligations to the IMF arising from its quota increase from SDR 467.7 million to SDR 654.8 million. Owing to this, the volume of potential financial assistance under future arrangements with the IMF has been proportionately expanded.

Cooperation programmes between the Republic of Serbia and the IMF

From 2000, cooperation between the Republic of Serbia and the IMF took place under the following arrangements:

  • 20 December 2000: Emergency Post-Conflict Assistance was approved in the amount of SDR 116.92 mn (around EUR 167.19 mn and 24.99% of the Serbian quota in the IMF) in order to support the country’s economic stabilisation programme and the reconstruction of institutions and administration (Press Release No. 00/75). The FR Yugoslavia channelled those funds to repay the bridge loan (SDR 101.1 mn, or around EUR 144.57 mn) granted by Switzerland and Norway to settle its obligations to the IMF.
  • 11 June 2001: a Stand-by Arrangement was concluded in the amount of SDR 200 mn (around EUR 293.7 mn, 42.76% of the quota), as financial support to further macroeconomic and structural reforms (Press Release No. 01/31). These funds were disbursed through four equal tranches, and repaid between March 2004 and May 2006.
  • 13 May 2002: a three-year Extended Facility Arrangement was approved in the total amount of SDR 650 mn (around EUR 909.38 mn, 138.98% of the quota) (Press Release No. 02/25), to support the economic programme of stabilisation and reforms. The approved funds were fully disbursed through 12 tranches and were repaid ahead of schedule during 2006 and 2007. The conclusion of this arrangement was especially significant because it paved the way for the implementation of the first stage of write-off of debt to Paris Club creditors in the amount of 51% (around USD 2 bn), while the successful realisation of the arrangement led to an additional 15% debt reduction totalling around USD 700 mn.
  • 16 January 2009: a precautionary Stand-by Arrangement in the amount of SDR 350.77 mn (around EUR 400.33 mn, 75% of the quota) (Press Release No. 09/12) was concluded. Due to unexpected negative events in the external financial environment, it was increased on 15 May 2009 to SDR 2,619.12 mn (around EUR 2,941.95 mn, 560% of the quota) (Press Release No. 09/169). Of that amount, a total of SDR 1,367.74 mn (EUR 1,536.33 mn, 293% of the quota) was drawn. This arrangement was successfully finished on 8 April 2011.
  • 29 September 2011: an 18-month precautionary Stand-by Arrangement was approved in the amount of SDR 935.4 mn (around EUR 1,076.75 mn, 200% of the quota). This Arrangement was concluded with a view to maintaining macroeconomic and financial stability in the country and improving the investment climate (Press Release No. 11/353). The first review under the Stand-by Arrangement in February 2012 was not positive because the 2012 budget deviated from the agreed fiscal program, and the approved funds were not drawn. 
  • 23 February 2015: a new 36-month Stand-by Arrangement was approved in the amount of SDR 935.4 mn (around EUR 1,168.5 mn), to support the agreed economic programme for the period 2015-2017. It was a precautionary arrangement, which means there was no intention to draw on the funds approved, except in case of BoP needs of the country (Press Release No. 15/67). This Stand-by Arrangement was successfully concluded on 23 February 2018. The implementation of the agreed economic programme helped achieve the objectives concerning macroeconomic balance, with a successful fiscal consolidation, improvement of the financial sector, strengthening the competitiveness and economic growth. The available funds were not used.
  • 18 July 2018: Policy Coordination Instrument was approved.

IMF Executive Board approves new cooperation programme for Serbia

At its meeting held on 18 July, the Executive Board of the International Monetary Fund (IMF) approved a new cooperation programme supported by the Policy Coordination Instrument (PCI) for Serbia.

The PCI-supported programme will build on the precautionary Stand-By Arrangement successfully completed in February 2018. It aims at maintaining macroeconomic and financial stability and advancing the structural and institutional reform agenda to foster rapid and inclusive growth, job creation and improved living standards.

The programme will last 30 months and Serbia’s progress in its implementation will be monitored through five semi-annual reviews.

The PCI is a new mechanism of support available to IMF members. It is an advisory instrument and does not envisage the use of any financial resources. The PCI is designed for countries committed to reforms and is agreed with a view to obtaining support for a specific economic programme when the country has no current or potential balance of payments problems.

The IMF Executive Board assessed that Serbia has succeeded in addressing macroeconomic imbalances and restoring confidence. Supported by a three-year precautionary SBA, Serbian authorities have restored fiscal sustainability, putting public debt on a firm downward path, and strengthened the country’s external position. Monetary policy has kept inflation under firm control, while supporting economic recovery and maintaining broad exchange rate stability. The confidence instilled by the improved macroeconomic situation has been reflected in rising investment, both from foreign and domestic sources, and has supported the economic recovery.

The IMF Executive Board emphasised that the country’s economic outlook remains positive. However, Serbia is still susceptible to spillovers from regional and global developments and market volatility. It was pointed out that delay in delivering on structural reforms, or erosion of fiscal discipline, could undermine confidence and reduce medium-term growth prospects.

The agreed programme, supported by the PCI, envisages a fiscal policy focused on further lowering of public debt, increased capital spending to address Serbia’s infrastructure needs, and some reduction of tax burden on labour and business.

The National Bank of Serbia’s monetary policy stance was assessed as appropriate in light of uncertainties in the domestic and external environment. The efforts to further strengthen the process of dinarisation will continue. As regards the financial sector, the IMF Executive Board acknowledged good performance in reducing non-performing loans, as well as the need for continued activities on this front. Other priorities include aligning financial regulatory and supervisory frameworks with EU standards, and addressing identified challenges in the AML/CFT framework.

Structural and institutional reforms under the programme are intended to improve the business environment, contributing to a successful EU accession process. These reforms will focus on the restructuring of state-owned enterprises, financial institutions and public administration, and on further suppression of the shadow economy.


Previous cooperation programs

  • 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.

  • The Executive Board of the International Monetary Fund (IMF) approved a three-year financial arrangement with FR Yugoslavia (FRY), the so-called Extended Arrangement for SDR 650 (about USD 829 million) to support the FRY's economic program of stabilization and reforms in the period 2002-2005 (Press Release No. 02/25 of May 13, 2002).

    The approval will enable the FRY to draw SDR 50 million (about USD 64 million) immediately, when the Arrangement goes into effect on May 14, 2002. The funds provided through the Extended Arrangement would be drawn in 13 tranches of SDR 50 million, subject to the bi-annual economic programme and structural reforms performance criteria assessment.

    The new financial arrangement was approved due to achievements and good results of the economic program and structural reforms set in the Stand-by Arrangement of June 11, 2001 as well as sustainable economic stabilization and reforms program of FRY for the period 2002-2005. The core medium-term economic program goals include: achievement of sustainable economic growth, improvement of citizens' living standard, lowering the inflation rate and father strengthening of country's foreign currency reserves. Key reforms will be implemented in the area of foreign exchange market liberalization, improvement of domestic payment system, enforcement of bank supervision, fostering of tax administration and stepping up the privatization process.

    The approval of the Financial Arrangement with the Fund will enable FRY to realize the first phase of lowering of FRY external debt towards the Paris Club Creditors amounting to 51%, i.e. about USD 2 billion, in line with the Reconciled Memorandum On the Federal Republic of Yugoslavia's Debt Consolidation, signed on December 28, 2001.

    Following the Executive Board discussion, it was announced that 'the IMF commends the FRY authorities on the impressive achievements in stabilization and reform since late 2000, when the FRY succeeded to membership in the Fund.' It was also said that the authorities medium-term economic program, supported by the Extended Fund Arrangement, aimed to achieve further progress in stabilization while providing for the restructuring and investment needs of the economy. The authorities were advised to firmly implement the program in order to keep FRY on a path towards durable growth and external sustainability. The authorities were also commended for demonstrated commitment to reforms in macroeconomic, monetary and fiscal policy and impressive speed with which they moved to implement key structural reforms. It was noted that the authorities' medium-term fiscal policy framework is consistent with achieving lower inflation and fiscal sustainability, cautioning, however, that it was critical for the fiscal sustainability to improve tax administration and streamline expenditure through improved efficiency in the delivery of services and better targeting of benefits.

    The IMF welcomed further liberalization of the exchange system which paved the way for the acceptance by FRY of the obligations under Article VIII, Sections 2, 3 and 4, as well as firm intention of the National Bank of Yugoslavia to closely monitor developments in the foreign exchange market and to keep exchange rate policy under close review.

  • O June 11th 2001 te IMF Executive Board has granted a stand-by loan to the FR Yugoslavia worth 200 million SDR (approximately USD 249 million) as a means to support the Federal Government’s economic programme (Press Release No. 01/31 June 11, 2001).

    On that occasion, Mr. Stanley Fisher, First Deputy of the Managing Director and Acting Chairman said:

    “The FRY authorities have embarked with impressive speed and commitment on the extremely difficult task of reconstructing their devastated economy. Maintaining this momentum will be key to building broad political support for the reform and securing its sustainability.”

    He also stressed that progess toward sustainable growth and external viability would require strong support from creditors and donors and that the Donor Conference on June 29 would provide the international community the opportunity to demonstrate its support by commiting program and project assistance in line with FRY estimated needs.

    FR Yugoslavia was immediately granted further 50 million SDR (approx. USD 62 mil). The remaining part will be available in three equal instalments each worth 50 mil. SDR, following the evaluation of the quarterly economic programme performance indicators as was agreed with the IMF.

    The results of the stand-by arrangement implementation are monitored quaterly on the basis of the accomplishment of the previously agreed upon quantitative performance criteria (net foreign reserves of the NBY, net domestic assets, borrowings of the consolidated general government from the banking sector, raising of new non-concessional foreign loans by the public sector, and prevention of sccumulation of new arreas under foreign debt servicing), as well as of the structural measures in the fiscal, financial and private sector.