Serbia needs to curb spending and continue economic reforms in order to keep inflation under control through next year, the International Monetary Fund (IMF) warned Wednesday.

Serbia is lagging with privatization and structural reforms, and its government faces pressure to meet election promises of increased spending, the head of an IMF delegation, Albert Jaeger, told reporters.

Overspending is expected to push Serbia's current account deficit to 18 per cent of gross domestic product by the end of the year, which it must cover by borrowing abroad.

The IMF said Serbia should seek to cut the deficit to 10 per cent of GDP in the mid-term.

Unchecked spending could offset the effect of economic growth of 6-7 per cent in 2008 and 2009 and exports, despite "impressive" growth, trail imports, Jaeger said.

He urged Serbia to "sharply cut" spending in the 2009 national budget and keep it in balance.

He pointed to government promises of higher pensions and planned infrastructure investments - cornerstones of the deal that led to a pro-European governing coalition following May elections.

Serbia's central bank should remain focused on suppressing inflation, particularly after it failed to keep the core inflation rate in the 3-6 per cent bracket, Jaeger said.

IMF officials visited Belgrade to evaluate Serbia's economic and fiscal policies. The country neither has, nor has sought a credit arrangement with the institution, though its central bank urged it to do so.