(Updates with more detail, background)
BELGRADE, Nov 7 (Reuters) - Serbia expects to reach a deal with the International Monetary Fund next week to help it weather the global financial storm, the Tanjug news agency reported on Friday.
"It is not the IMF demanding anything from us, but we are in a situation that we need to fight against the global crisis and that's why we need to cooperate with the IMF," Prime Minister Mirko Cvetkovic was quoted as saying.
"But we are taking our own measures without any pressures," he said, adding that next year's budget deficit would be cut to 1.5 percent of gross domestic product.
Serbia needs to cut its fiscal gap to 1.5 percent of GDP in 2009 from 2.7 percent of GDP this year to win the IMF's backing, requiring it to implement unpopular belt-tightening, including a wage and pension freeze.
Cvetkovic leads a coalition of pro-Western parties, the Socialists of late autocrat Slobodan Milosevic and a small Pensioners Party, the kingmakers who joined the government in exchange for a pledge to boost pensions to 70 percent of average salaries -- a request the economy could not sustain.
The government is negotiating a standby deal with the IMF although Finance Minister Diana Dragutinovic said earlier this week the Balkan country would not need to draw funds from the IMF unless investment and credit ground to a halt.
Cvetkovic was also quoted as saying the impact of the global financial crisis meant 2009 growth would, at most, be 3.5 percent.
Late last month, Cvetkovic had said Serbia expected 2009 growth of 4.0 percent in 2009.
Belgrade hopes the deal with the IMF will help rebuild investor confidence, as it struggles to draw in enough investment and credit to finance a current account gap of 18.5 percent of GDP.
Serbia's dinar currency
Cvetkovic said Serbia's exchange rate policy was not to defend any particular dinar level, but only to intervene against sharp daily swings, without affecting the trend.
But the central bank's sudden intervention of 12 million euros on Friday lifted the dinar to 83.60-84.50/euro range, wiping out most of its losses this week.
"They were selling euros at 84.50 dinars, far below the mid-rate. This does not happen too often and we read it as a signal that they are prepared to do all it takes to bolster the dinar," a senior treasury analyst said.
"With the IMF deal likely, they will have enough room to defend the currency," one currency trader said. (Reporting by Gordana Filipovic; Editing by Mike Peacock)