Serbia negotiating precautionary IMF deal-cenbanker

BELGRADE (Reuters) - Serbia is negotiating a precautionary deal with the International Monetary Fund and it is still too early to say if it would also need financial support, central bank governor Radovan Jelasic said on Friday.

"We are negotiating a precautionary program," Jelasic told reporters. "It is still not the time to discuss whether we need a credit or not ... The most important thing is to agree a program because that would boost Serbia's credibility."

Government officials have repeatedly dismissed a need for Serbia to draw any funds from the IMF and said that it would ultimately be up to the central bank to decide.

"I would be the happiest person in the world if that was the only thing left to decide."

Serbia has invited the IMF to help it draft the 2009 budget and its mission arrived in Belgrade earlier this week for two weeks of talks with government and central bank officials.

The World Bank, also helping the government draft the next year's budget, said earlier this month that the budget deficit should not exceed 2.0 percent of GDP next year, so that Serbia could count on more World Bank funding.

A program with the IMF would help Serbia improve its macroeconomic stability, Jelasic said, speaking only hours after the Statistics Office reported October headline inflation back to double digits at 10.5 percent and the 9-month foreign trade gap of $9.4 billion (5.8 billion pounds), 42.2 percent up on January-September 2007.

Earlier in the day, the central bank hiked its key policy rate, the two-week repo, by 200 basis points to 17.75 percent to prop up the faltering dinar and step up fight against inflation.

Jelasic would not say if the IMF backed the latest policy tightening move.