The International Monetary Fund (IMF) has approved a three-year loan program worth EUR 1.2 B for Serbia.

The Serbian government intends to treat the program as precautionary, according to a media statement of the IMF.

The program is based on three main pillars: restoring public finances’ health; increasing the stability and resilience of the financial sector; and implementing comprehensive structural reforms, to form a solid foundation for job creation and return to sustained high growth.

Serbia’s GDP contracted in 2014 due to continued falling domestic demand aggravated by floods, and weak economic activity among trading partners. A high rate of unemployment remains one of the largest social concerns, as chronic structural rigidities continue to undermine the overall competitiveness of the economy, according to the IMF.

The recession in 2014 was the third in the last six years.

Public debt has risen rapidly to uncomfortably high levels, and despite some fiscal consolidation efforts in recent years, the fiscal deficit rose to 6.6% in 2014, due to higher state aid to loss-making state-owned enterprises and mandatory spending.

Public debt reached over 70% of GDP in 2014.

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