The International Monetary Fund (IMF) Executive Board has approved a 36-month Policy Coordination Instrument (PCI) for the Republic of Serbia. This decision follows the conclusion of the fourth and final review under the Stand-By Arrangement (SBA), which was initially approved on December 19, 2022. The SBA, valued at SDR 1.89 billion (approximately EUR 2.4 billion), was treated as precautionary by Serbian authorities, who did not make any purchases despite being authorized additional access to SDR 316.47 million (about EUR 400 million). The arrangement was canceled ahead of its expiration date to facilitate a smooth transition to the PCI.
Under the SBA, Serbia saw improvements in its fiscal deficit and public debt, with inflation falling within the central bank's tolerance band amidst strong economic growth and labor market conditions. Reserves reached record highs, and there were notable advancements in public investment management and state-owned enterprise governance reforms.
Looking forward, Serbia's economy is projected to grow close to 4 percent in 2024 with further increases expected in subsequent years due to continued wage growth, employment gains, and rising public investment. Inflation is anticipated to align with the central target over time amid robust domestic demand.
The PCI aims for a fiscal deficit no greater than 3 percent of GDP from 2025-27 and further reductions thereafter. This approach balances public spending priorities while maintaining fiscal discipline and reducing public debt. Deputy Managing Director Mr. Bo Li stated: “Under the Stand-By Arrangement (SBA), the Serbian authorities pursued ambitious reforms, helping achieve strong economic outcomes."
He added that "the Policy Coordination Instrument (PCI) program will support the Serbian authorities in their continued commitment to sound macroeconomic policies." He emphasized that fiscal deficits should remain below specified thresholds during this period to ensure balanced spending priorities.
Mr. Li also highlighted that "a restrictive monetary policy stance will help guard against upside inflation risks," suggesting that while Serbia's financial sector remains stable, vigilance is necessary alongside ongoing regulatory improvements.
Serbia's key economic indicators show promising trends for future development under this new framework set by the IMF.