Page last updated at 09:32 GMT, Monday, 24 August 2009 10:32 UK

IMF set to decide on Serbia loan

Serbian flag
Serbia says it will not increase taxes to raise money

The International Monetary Fund (IMF) is in Serbia to decide whether to release the second tranche of a 3bn euros ($4.3bn; £2.6bn) loan.

The 800m euros instalment is dependent on the government making reforms to comply with IMF conditions set out when the original loan was agreed.

These require large scale cuts in the government's budget deficit.

The Serbian economy has been hit hard by the global downturn and is expected to contract by more than 5% this year.

We've gone totally bust - it's a disaster

The government needs to reduce its levels of debt but prefers to cut spending rather than raise taxes.

"The government will present its strategy to the IMF mission without VAT or tax increases... but with a strategic plan of downsizing public costs through a decrease of the public administration," said Serbian environment minister Oliver Dulic last week.

"We hope that the IMF will show some understanding of our move."

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