Public Expenditure Development Policy Loan

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The objective of the Programmatic Public Expenditure Development Policy Loan Program (PE DPL) for Serbia is to support reforms that will help improve the productivity of public spending, structured around three key policy areas: (i) public expenditure management reforms to address poorly managed fiscal spending and to help improve fiduciary conditions; (ii) public expenditure allocation reforms to improve the quality of spending in the largest spending sectors; and (iii) social assistance, especially for cushioning the impact of the economic crisis and enhancing the coverage of the social assistance programs going forward. The programmatic series, as envisaged in the Country Partnership Strategy (CPS) as updated by the Country Partnership Strategy Progress Report (CPSPR), is planned to amount to at least US$200 million. These three loans are expected to be executed sequentially during 2009-2011, and there is an envelope of US$100 million equivalent for the first operation. The PE DPL series, which is aimed at reducing the size of Serbia's large public sector, is complemented by a private and financial sector DPL series, aimed at facilitating the growth of the private sector, through enhancing the business enabling environment, strengthening financial discipline and building a more efficient and stable financial sector. The operation has been conceived within the context of the Country Partnership Strategy Progress Report (CPSPR) to accommodate the need for additional budgetary and liquidity support occasioned by the global economic crisis. The total lending envelope for Serbia has been increased by US$300 million beyond the original CPS allocation. This additional lending is to be allocated to development policy lending which will help meet Serbia's medium term financing needs. The operation will be part of a coordinated financing package with the International Monetary Fund (IMF) and the European Commission (EC).