National Bank of Serbia Governor Dejan Soskic said on Jan. 23 that the delay in talks with the International Monetary Fund (IMF) could have very serious consequences, through the increase of interest rates and lower inflow of foreign investment.

"The central bank calls for additional effort, with the aim of reaching an agreement and continuing of the arrangement with the IMF," Soskic said, reiterating that the arrangement with the IMF in conditions of international crisis is an additional guarantee of Serbia's macroeconomic stability.

"The key danger (from delaying the review) is for Serbia to be defined as a country that has not completely fulfilled the agreement," he pointed out.

This, he said, would result in the deterioration of relations with the IMF, which could negatively affect the foreign currency market, the public debt market and investments, and good relations with the IMF are also a condition for favorable loans from international financial institutions.

Soskic said that problems in relations with the IMF could also directly lead to a decline of Serbia's risk premium, which leads to an increase of interest rates and the reduction of direct foreign investment, and would have a very serious impact on a number of macroeconomic parameters.

The IMF Executive Board has postponed the ratification of the first review of the stand-by credit arrangement with Serbia, worth EUR1.1 billion, since the Serbian budget for 2012 exceeded the agreed level of loans.