The IMF allowed Serbia's government to widen the 2009 budget deficit to 4.5% of GDP from 3% of GDP. Simultaneously, the IMF mission decided not to complete the current programme review until October. This means that if the IMF Executive Board approves the review in October, the second and third loan tranches, which amount to a combined EUR 1.4bn, will be paid out together. The downside is that Serbia will have to wait until October for the money. The reason for not completing the current review in September is the Fund demanding a comprehensive fiscal reform and not just temporary measures, such as freezing public sector wages and pensions, for example. IMF mission head Albert Jaeger said the Fund expected the government to prepare sustainable spending cuts and increased efficiency in the public sector. Our view:The outcome of the IMF review is sub-optimal but it could it have been worse. The decision to delay the completion of the review until October allows the government to prepare fiscal adjustments as requested by the IMF. It remains to be seen how the Fund will react if the government fails to meet expectations. Latvia's example suggests that the IMF is prepared to take a hard line and further delay the disbursement of the loan tranches if it is not satisfied with the proposals.