Serbia calls on IMF and UAE for support as borrowing costs soar

Serbia calls on IMF and UAE for support as borrowing costs soar

Serbia has turned to the IMF and the United Arab Emirates for help in handling its soaring debt costs, in a move that highlights the impact of higher interest rates and the economic downturn on Europe’s emerging markets.

The IMF on Tuesday confirmed to the Financial Times that Belgrade had called for discussions on a so-called standby arrangement. Such an arrangement would allow Serbia to draw on IMF support in the event that Belgrade could not sell its bonds to investors.

Authorities hope that having the Fund’s assurances in place will prevent further rises in the country’s borrowing costs on international markets, which have more than tripled since the turn of the year from less than 2 per cent to more than 6 per cent.

“You don’t want to have a standby arrangement with the IMF if you’re a stable country but maybe it’s better to eat humble pie now to make sure you are not refinancing at more than 6 per cent,” said Tamara Basic Vasiljev, senior economist at Oxford Economics.

News of the IMF request comes after Abu Dhabi offered Serbia a $1bn loan at 3 per cent. “If we were to enter the financial market, it would cost us at least