By Aleksandar Vasovic
BELGRADE (Reuters) - International Monetary Fund officials will focus on concerns that Serbia is eating into the independence of its central bank when they visit next month, and will not discuss a new loan deal sought by the government, a Fund official said on Friday.
Serbia's Socialist-led government, which took power a month ago, says it wants a new loan arrangement after the IMF froze a 1 billion euro ($1.26 billion) standby deal in February over the country's rising public debt and budget deficit.
The Fund's resident representative, Bogdan Lissovolik, said a short fact-finding mission was tentatively scheduled for mid-September to assess Serbia's latest macroeconomic outlook. But he added:
"The mission will also discuss the IMF's concerns about the recent changes to the NBS (National Bank of Serbia) law that undermined its autonomy and about the fiscal situation. It will not engage in program discussions."
Ignoring warnings from the IMF and the European Union, the government has stepped up parliamentary control over the central bank and replaced the governor with a lawmaker from the ranks of the ruling coalition.
The move has unnerved financial markets already jittery over a budget deficit of 7.1 percent of output and public debt of almost 55 percent, far higher than the IMF has in past recommended for similar emerging economies.
The government, an alliance of mainly socialists and nationalists who last held power together under late strongman Slobodan Milosevic when Serbia was mired in war and hyperinflation, has given no sign of rowing back despite the international criticism.
"The IMF will likely acknowledge the reality that low industrial activity brought less revenues, hence the increase of the budget deficit and the mission will likely tolerate that," said economics lecturer Vladimir Vuckovic, a member of Serbia's advisory Fiscal Council.
"What it will not tolerate is inflated public spending, while the central bank law will also be a matter of tough scrutiny," he said.
($1 = 0.7947 euros)
(Writing by Matt Robinson; editing by Patrick Graham)