Prime Minister Mirko Cvetkovic stated that an agreement has been reached with the IMF about lifting the public sector salary freeze in January 2011, adding that it was also agreed that the government will submit the fiscal responsibility bill to the parliament.

In an interview with the daily Press, Cvetkovic said that the salaries of public sector employees will be increased in January, April and October next year.

It was concluded at the meeting that agreed upon programmes are being implemented successfully, the situation regarding budget revenues has improved when compared to the first quarter of this year and that the Serbian economy is growing faster than in the previous four months, he underlined.

On the basis of these parameters it was agreed that the public sector salary and pension freeze will be lifted in 2011, explained the Prime Minister.

He announced that the salary increase in January will be based on the growth of prices during the past six months. In April salaries will be adjusted for the growth of prices as well as half of GDP growth and in October they will be adjusted for inflation.

It was also agreed with the IMF that the Serbian government should submit the fiscal responsibility bill to the parliament within the next two to three weeks, he added.

The most important element of the bill is that this year we will have a deficit of nearly 4.75%, while next year it will fall to 4% and the year after to 0.75%, until it comes to -1%, he elaborated.

Public debt is also defined by the bill. Currently it stands at 32% to 33% and it cannot exceed 45% of GDP, noted the Prime Minister.

The Prime Minister pointed out that public spending will be reduced in the upcoming period, but not by nominal reduction of expenditure, rather through accelerated GDP growth, adding that a special body will be formed to monitor the implementation of the Law on fiscal responsibility.

Stronger support for the Dinar and making domestic transactions in the local currency was also discussed with the IMF. This would make the exchange value of the Dinar less important for the public than it is at the moment when loans and other transactions are connected to the Euro or other foreign currencies, affirmed the Prime Minister.

The unfavourable structure of the budget was also discussed with the IMF. A major part of the budget consists of current expenditure and not investment, he commented.

It was confirmed at the meeting with the IMF that after the successful sale of Telekom Srbija all funds will be used to stimulate capital investment projects in Serbia, not for covering current spending, highlighted Cvetkovic.