Serbia and the International Monetary Fund have reached a new non-financial and advisory agreement designed to help Belgrade sustain growth during and after the COVID-19 pandemic, the lender said in a statement on Friday. Serbia’s economy contracted 1.1% last year, less than its regional peers, mainly due to a substantial policy response to the pandemic, the IMF said.

“Policies should continue to support people’s lives and livelihoods until economic recovery is fully entrenched,” he said. The new Policy Coordination Instrument (PCI), a non-financial and advisory tool of the IMF, is expected to last until 2023. It would help Belgrade improve the business environment, strengthen the rule of law and reform businesses public and environmental policies.

A previous three-year PCI agreement expired last year. The Serbian parliament on Thursday amended the 2021 budget to mitigate the effects of the pandemic, increasing the deficit from 3% to 6.9% of economic output.

The spending includes a 2.5 billion euro ($ 3.02 billion) package of grants and payments to businesses and citizens to help weather the crisis. The IMF has warned that additional budget support should be targeted at the most vulnerable households, businesses and sectors.

“Investments in infrastructure and environmental protection can also support short-term growth,” he said. The lender has confirmed its 2021 growth forecast for Serbia at 5% of GDP.

But the economic recovery of the candidate for the European Union is still uncertain due to the evolution of the pandemic in Serbia, which has a strong nationwide COVID-19 vaccination campaign, and its business partners, a said the IMF. The new deal with Belgrade is expected to be approved by the IMF’s Executive Board in mid-June.

(1 USD = 0.8282 euros)

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