Serbia will not be able automatically to withdraw the second instalment of funds approved by the International Monetary Fund (IMF) unless it meets the undertaken obligations, and one of the key criteria is the amount of the budget deficit in end-June which will be significantly higher than the agreed amount, National Bank of Serbia (NBS) Governor Radovan Jelasic said on Tuesday.

In that case it will be necessary to hold additional talks with the IMF, and it will be possible to withdraw the second instalment of the funds only after the Memorandum is changed, Jelesic said in an interview with Tanjug on the occasion of 125 years of work of the Serbian central bank.

"We believe, naturally, that it would be best that additional measures are taken on the spending side," Jelasic said, underscoring that care should be taken in adopting measures for increasing the income about their possible effect on inflation.

The Serbian government Memorandum explicitly lists two options for increasing the budget income - increasing the value-added tax and reducing nominal salaries, the governor said.

"The government did not give any other alternatives in that document, but alternatives naturally do exist," Jelasic said, underscoring that possible savings in pensions, education, health, and other public sectors should be considered, even though that would yield a positive effect only after six or 12 months.