State Secretary of the Ministry of Finance Dusan Nikezic announced today that the official negotiations between Serbia and the International Monetary Fund (IMF) will begin on 22 August.

Nikezic said in an interview for Tanjug news agency that the aim of the talks is to reach a new precaution arrangement, which the IMF Board of Directors should adopt at the regular meeting which will be held in late September.

The Ministry of Finance has a clear plan of how to keep the budget deficit within the legally prescribed limits this and next year, he underlined and added that this plan will be presented to IMF representatives.

Immediately after the end of talks with the IMF, this Ministry will prepare a budget revision draft, which it will then harmonise with all ministries and submit to the government in September.

Nikezic expressed his hope that during the talks with the IMF mission an agreement will be reached on important aspects of the budget revision for this year, as well as on budget frameworks for 2012.

The State Secretary of the Ministry of Finance recalled that amendments to the Law on local self-government will come into force on 1 October which will reduce budget revenues, and noted that this is one of the changes that will be accepted in the revision.

This budget revision will also include the legally prescribed increase in salaries and pensions in October in line with the increase of the cost of living and economic growth in the previous period.

Nikezic explained that necessary adjustments of budget revenues and expenditures will also be implemented in order to ensure that the deficit in 2011 is in line with fiscal rules envisaged by the Law on budget system.

He pointed out that Serbia's budget revenues in the seven months of this year are slightly lower than planned - a little over 1%, but expenses are also lower than planned, so the budget deficit is in line with the plan, i.e. it will not exceed the prescribed 4.1% of GDP.

Speaking of the current disturbances on the world market, he recalled that at the recent meeting of Prime Minister Mirko Cvetkovic with members of the government, the Fiscal Council and the Governor of the National Bank of Serbia (NBS), it was agreed that the crisis has still not become apparent in Serbia, but the agreement was reached to closely monitor all potential indicators of crisis.

Also, it was noted that this time it is a crisis of sovereign debt, as opposed to the previous financial crisis that hit the global economy in 2008, Nikezic explained.

He added that participants in the meeting agreed that the best way to protect Serbia from potential negative effects of the crisis is to strictly adhere to fiscal rules, which will be easier to do after the new arrangement with the IMF is concluded, Nikezic assessed.