Inflation in Serbia in the first three months of 2011 will very likely be at 5.5 percent, which is above the expectations of the National Bank of Serbia (NBS), but it is believed that it will fall in the second half of the year, NBS Governor Dejan Soskic stated Monday.

At a news conference, Soskic pointed out that the inflation is expected to drop as of June 2011 at the latest, noting, however, that the prices are expected to go up for some time in the future.

"NBS in no way deviates from its goal and it will aim at approaching the inflation target (4.5 plus minus 1.5 percent) by the end of the year. Whether this will be realized one month sooner or later is not as important as securing a low inflation rate, which is in accordance with the targeted projection," Soskic stressed.

He underscored that the growth in state-regulated prices from January to March reached 4.7 percent, and when the 7.5 percent rise in electricity price is taken into account, that means that the state has already spent the planned 7-percent growth in regulated prices for the entire year.

Soskic stressed that the rise in food prices is still the most significant component of inflation, which, according to Soskic, is troublesome, as Serbia is a country which produces more food than is necessary for its population's consumption.

He said that it the authorized state bodies need to implement adequate measures and find systemic solutions which will ensure a greater degree of food price stability.

Soskic: New arrangement with IMF to be made mid 2011

Governor of the National Bank of Serbia (NBS) Dejan Soskic stated Monday that Serbia could sign a new arrangement with the International Monetary Fund (IMF) as early as mid 2011.

Soskic recalled at a press conference that the NBS believes that a new arrangement would be very useful, adding that this should be a two-year precaution arrangement which would enable Serbia to take determined steps forward in terms of structural reforms.

“We have learned from the government that the prime minister has a similar view on the issue, and that once Serbia makes an official request for a new arrangement the IMF will take it into serious consideration very quickly,” the governor underscored.

“I would not be surprised to see Serbia with another arrangement of the kind mid 2011,” he said.

Soskic underscored that it is important for the arrangement to be signed out of precaution i.e. not to imply Serbia's additional indebtedness, and also to leave certain amount of disposable funds in case of some unpredicted trends in the international market.

“In the manner, Serbia would be able to approach structural reforms without further ado and with much more security and trust in international investors in the coming months and years,” he added.

The governor underlined that out of the total of EUR 350 million approved by the seventh revision, Serbia will draw about EUR 50 million so as not to surpass the amount which secures favorable reimbursement terms.

The IMF Executive Board approved the seventh, final revision of its two-year arrangement with Serbia on April 8, which enabled Serbia to draw EUR 350 million.

So far, Serbia has drawn EUR 1.48 billion within the arrangement which totals EUR 2.87 billion.