Talks on the fourth review of the IMF Arrangement to begin today – No room for raising salaries and pensions in 2017

The Mission of the International Monetary Fund (IMF), headed by James Roaf, is commencing technical talks in Belgrade today about completing the fourth review of the Stand-By Arrangement with Serbia, and the plan is for the visit to last two weeks.

The official talks with the representatives of the Government of Serbia and the National Bank of Serbia will begin on Monday, June 13. The main topics are the state of the budget and the reform of the public sector and public enterprises.

The IMF signed a three-year precautionary Stand-By Arrangement with Serbia in February 2015 in the value of EUR 1.2 billion. The previous three reviews have been positive, and the fourth one was done in February 2016, prior to the snap parliamentary elections, so the Mission of the IMF has decided to complete the review after the new government has been formed.

It is expected that Serbia will be commended on the state of its public finances, but that it will also need to explain why it is late with discharging surplus employees in the public sector and carrying out the reorganization of big public enterprises.

No room for raising salaries and pensions

Head of the Mission of the IMF for Serbia James Roef said in his interview in the latest issue of NIN that raising salaries and pensions in 2016 was out of the question, due to the delay in rationalizing the public sector and added that the IMF thought there was no room for the raise in 2017 either.

Roef said that the first topic in any conversation about salaries and pension in the public sector needs to be the very hard demographic situation.

- The public sector employs more people that the private one and pays bigger salaries for the equal amount of work. In addition to that, there's one pensioner for each worker who pays contributions to the retirement fund. This is why the initial plan was based on not only greatly reducing the number of employees in the public sector, but also on the complete freezing of salaries and pensions over three years – explained Head of the Mission of the IMF.

- There has also been a significant delay in reforms in the area of rationalizing the public sector, which means that the progress of the reduction of salary and pension expenses is slower than planned. The conclusion is that raising salaries and pensions in 2016 is out of the question, but also that, if the government fails to identify significant new ways of fiscal saving, there will be no room for raising them in 2017 either – said Roef.

When asked when the citizens of Serbia might expect the increase in the standard of living, he says that this is always a challenge in short-term projects, since in the beginning the real income usually goes down until the excessive budget deficit is put under control.