By Gordana Filipovic
BELGRADE, Nov 5 (Reuters) - Serbia has likely saved enough to weather the global credit crunch for up to a year without IMF aid, and even a total halt in capital inflows would leave it needing a maximum of $700 million in extra funding, its finance minister said.
Worries have grown over the small former communist economy, the centre of the Balkan wars of the 1990s, as its currency slumped over the last month amid concerns it is too dependent on funds from tightening foreign credit markets.
The government on Monday said it was in talks for a stand-by deal with the IMF, making it the latest country to seek help from the international lender in the global financial crisis.
Finance Minister Diana Dragutinovic said next year's budget should stop it needing to dip in to IMF coffers at all and that in the worst case it would use only its special drawing rights -- or the roughly $695 million that it deposited with the Fund.
"We still need no IMF cash," Dragutinovic told Reuters in an interview late on Tuesday night. "In the next six to 12 months we will need no financial assistance if there is no sudden stop in investments and capital inflows."
"In the case of a sudden stop, we will need to borrow, but our quota will be enough. Capital is still flowing in and our hard currency reserves are big enough."
Analysts say that Serbia, a small but open economy heavily reliant on external borrowing and investment, is not as exposed to the global crisis as Iceland, Ukraine or Hungary, nations which have been hit by market turmoil in recent weeks.
But they had speculated Serbia could need up to 2.0 billion euros ($2.57 billion), based on potentially risky short-term repo maturities and credits. That would be equivalent to around five percent of its gross domestic product.
Fears the situation could worsen sent the dinar to a two-year low to the euro on Wednesday. The central bank spent around 260 million euros of its reserves defending the currency in October, bringing them to around 9.4 billion euros.
EXTERNAL WORRIES Serbia, hoping to apply for European Union membership in 2009, needs between three and five billion euros a year in investment and loans to finance the current account gap and maintain economic stability.
Dragutinovic said she was confident that with more than 800 million euros in past and pending privatization revenue, Serbia had no need to seek anything other than a precautionary stand-by deal to access its SDR quota with the IMF.
"We really need no additional funds if we have a decent 2009 budget," the minister said. "That means a consolidated fiscal deficit of up to 1.5 percent of GDP, but probably even lower."
A top government official told Reuters on Tuesday the IMF wanted Serbia to cut its fiscal gap to 1.5 percent of GDP from 2.7 percent in 2008 through a wage and pension freeze.
Officials say the IMF's role in Serbia would be to rein in growing spending and restore confidence among investors doing business in the Balkan country but also among savers, who withdrew more than 500 million euros in October.
Reports of the global financial crisis have stirred memories of the 1990s when Serbians lost more than $4.0 billion in private hard currency savings, prompting many to replace bank accounts with safety deposit boxes.
The bout of panic seemed to be over, but it would take time to rebuild confidence, Dragutinovic said.
The central bank has freed 450 million euros in hard currency liquidity by changing reserve requirement rules, while banks in Serbia received more than 800 million euros in October from their parent institutions to offset the fall in deposits. (Editing by Adam Tanner and Patrick Graham)