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Serbia asks IMF to unfreeze wages

By Dusan Stojanovic
Associated Press Writer / May 17, 2010

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BELGRADE, Serbia—Faced with possible social unrest, Serbia asked the International Monetary Fund on Monday to allow an increase in state salaries and pensions that were frozen as part of a bailout loan deal.

The two-year euro2.9 billion ($3.58 billion) IMF loan was agreed to a year ago, after Serbia's economy suffered a major blow because of the global meltdown. Serbia has drawn some euro1.3 billion from the standby package.

On Monday, an IMF delegation opened talks with Serbian officials on the country's compliance with the terms of the deal, and possible amendments to the original agreement.

A statement by Serbia's Prime Minister Mirko Cvetkovic suggested the IMF should consider the salary and pensions hikes in view of Serbia's improved economic performance. Serbian officials did not say how much they want the wages increased.

The austerity measures have led to a modest increase in the gross domestic product in 2010 -- compared to negative growth in 2008.

Despite signs that Serbia is recovering from recession, the freezing of state wages has triggered a series of walkouts and street protests.

The Balkan country's pro-Western government fears that, if the recovery is not coupled with increased living standards, it may lose the 2012 parliamentary elections to the nationalists and populists seeking to return to power.

Adding to the social tensions is the sharp fall of the national currency, the dinar, which is recording its worst performance against the euro since the euro's creation 11 years ago.

The dinar traded down at 100.2 per euro on Monday -- from highs of 75.75 a euro in August 2009 -- even though the National Bank has intervened with millions of euros at the exchange markets since the beginning of this year.