Journal Issue

IMF Executive Board Discusses Ex Post Assessment of Longer-Term Program Engagement and Ex Post Evaluation of Exceptional Access for Republic of Serbia

International Monetary Fund
Published Date:
July 2011
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On July 13, 2011 the Executive Board of the International Monetary Fund (IMF) discussed the Ex Post Assessment of Longer-Term Engagement and Ex Post Evaluation of Exceptional Access for Serbia.


The Ex Post Assessment reviews Serbia’s economic performance under Fund-supported programs during the period 2001-2011. During seven of those ten years there were three Fund arrangements in place. The Ex Post Evaluation reviews the 2009 Stand-by Arrangement with exceptional access.

The report concludes that substantial progress has been achieved in the last ten years of the Fund’s involvement with Serbia. In 2001, Serbia was recovering from the ravages of war, international sanctions and economic mismanagement: output had collapsed, inflation was rampant, and the external position was non-viable. Macroeconomic stabilization has by and large been achieved over the past decade, debt is manageable, and there is a modern banking system in place. The most recent Fund-supported program helped the country navigate the global crisis and safeguard financial stability, and recovery is in train. But despite these successes, significant vulnerabilities and a large structural reform agenda remain.

The report further concludes that a new Fund-supported program could help Serbia complete and entrench the transition to a more balanced growth model, and tackle its remaining structural reform challenges. In particular, a new arrangement could play a useful role as a coordination device for the government and serve as an anchor for polices in a pre-election year, send a positive signal to investors, and coordinate the contribution of other International Financial Institutions. Past experience with Fund involvement in Serbia suggests that strong ownership is an essential precondition for program success.

Executive Board Assessment

Executive Directors agreed with the conclusions of the Ex Post Assessment and Ex Post Evaluation. They noted that Serbia has made substantial progress towards macroeconomic stabilization in the ten years of its engagement with the Fund. The country also attained debt sustainability and put in place a modern banking system. The 2009-2011 Fund-supported program also helped Serbia navigate the global financial crisis, and recovery is ongoing. However, progress on the structural reform agenda has lagged. To transition to a more balanced growth model, Serbia still needs to address significant challenges and vulnerabilities and implement far-reaching reforms.

Directors recognized the important progress in achieving macroeconomic stabilization and advancing structural reforms under the 2001 Stand-By Arrangement. Results under the 2002–2006 Extended Arrangement however were less consistent. While there was progress in several areas, macroeconomic performance fell short of expectations. Robust but unbalanced growth amid large capital inflows and lagging structural reforms contributed to rising external imbalances and vulnerabilities in the run-up to the global crisis.

Directors agreed that the 2009 Stand-By Arrangement, subsequently extended and augmented to exceptional access, facilitated an orderly rebalancing of the economy amid the global crisis and helped safeguard financial sector stability. Under this arrangement, macroeconomic performance was broadly satisfactory but progress on structural reforms was slower than envisaged. Directors considered the program’s focus on three main elements—fiscal adjustment, bail in of foreign banks, and exceptional financing—to be appropriate.

In general, Directors concurred with the lessons from the ex post assessments. They agreed that the right incentive structure can help increase critically important ownership of policies in a difficult political environment. Program design needs to be consistent with the stated objectives, which would have warranted a greater focus on Serbia’s structural agenda. In addition to close collaboration with other international financial institutions, greater use of prior actions could have been helpful in this regard. Directors also highlighted the merits of flexibility in adapting the program to prevailing circumstances, and the need for durable fiscal adjustment to be supported by institutional and structural reforms.

Directors noted that continued engagement with the Fund, possibly in the context of a low-access precautionary arrangement, could play an important role to anchor fiscal discipline and address remaining policy challenges. At the same time, experience suggests that strong ownership to support implementation of decisive policies and critical reforms will be essential for the success of a future program.

Public Information Notices (PINs) form part of the IMF’s efforts to promote transparency of the IMF’s views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case. The staff report (use the free Adobe Acrobat Reader to view this pdf file) for the Ex Post Assessment of Longer-Term Program Engagement and Ex Post Evaluation of Exceptional Access for Republic of Serbia is also available.

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