Serbia to ask IMF to okay increase in public sector wages, pensions

August 22, 2016 1:13 PM EDT

Visitors are silhouetted against the logo of the International Monetary Fund at the main venue for the IMF and World Bank annual meeting in Tokyo October 10, 2012. REUTERS/Kim Kyung-Hoon

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BELGRADE (Reuters) - Serbia's government will seek approval from the International Monetary Fund to raise public sector wages and pensions, Prime Minister Aleksandar Vucic said on Monday, adding that stronger-than-expected fiscal performance gave scope for that.

In July, the Serbian budget had a surplus of 22 billion dinars (179 million euros), compared with an expected shortfall of 83 billion dinars. GDP growth for 2016 is forecast to reach 2.5 percent, up from previous estimates of 1.8 percent.

"In September or October we will start talks with the IMF about the rise ... there's scope and strength for that," Vucic, whose new government was endorsed by parliament on Aug. 11, told a news conference. He did not say what increases he would seek.

Serbia cut pensions and public sector wages in 2014 to secure a 1.2 billion-euro precautionary deal with the IMF. As part of the agreement, Belgrade needs IMF backing to increase them.

In June, after completing the fifth review of its loan deal with Belgrade, the IMF commended Serbia for its economic performance and said it would address public sector wages and pensions when it reviews Serbia's 2017 budget plans.

The IMF expects Serbia's budget deficit to reach 2.5 percent of national output in 2016, compared with a targeted 4 percent.

(1 euro = 123.2095 Serbian dinars)

(Reporting by Aleksandar Vasovic; Editing by Ingrid Melander and Andrew Roche)

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