Serbia and Montenegro : 2005 Article IV Consultation Staff Report; Fifth Review Under the Extended Arrangement, Financing Assurances Review, and Request for Waiver of Nonobservance of Performance Criteria and Rephasing of Purchases—Staff Report; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Serbia and Montenegro

This 2005 Article IV Consultation highlights that macroeconomic imbalances in Serbia and Montenegro widened in 2004, putting at risk some of the impressive earlier achievements. Growth, about 5 percent in nonagriculture since 2002, has been fueled by a surge in domestic demand. Lack of competitive domestic production has led to increased imports and a widening current account deficit. The main policy challenge is to maintain macroeconomic stability while accelerating structural reform. Fiscal policy needs to be tightened substantially, and its flexibility increased by reducing the large share of nondiscretionary spending