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(Bloomberg) -- Serbia will sell debt and assets this year and invest in infrastructure to accelerate growth as it tightens budget spending according to agreements with the International Monetary Fund, the country’s premier said.

The biggest former Yugoslav republic plans to raise as much as 1.5 billion euros ($1.7 billion) in foreign markets, sell Telekom Srbija AD by the end of the third quarter and find investors for about 200 of 500 unprofitable companies to end a $1 billion drain on the budget, Premier Aleksandar Vucic said in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland.

“There are very big challenges that we’ll face in implementing the IMF program,” Vucic said. “Fiscal consolidation measures will remain one of the biggest challenges” as well as changes in state-owned companies.

Vucic, who wants to prepare Serbia for European Union membership by 2020, is struggling to bolster growth in an economy flirting with its fourth recession since 2009 and where unemployment is hovering at 22 percent. Economic output will shrink 0.5 percent after a 2 percent drop in 2014, the World Bank said in a report on Tuesday.

Serbia reached a staff-level agreement with the Washington- based lender in November. The IMF board of directors is expected to discuss the three-year precautionary deal of 1 billion euros by Feb. 23, Finance Minister Dusan Vujovic said in an interview in Vienna on Tuesday.

Cabinet Goals

Vucic’s nine-month-old cabinet cut public wages and pensions last month as part of efforts to narrow the budget gap to about 3 percent of gross domestic product by 2017 from 7.9 percent. It also needs to refrain from new guarantees and subsidies to money-losing companies to qualify for the IMF deal and World Bank financial assistance.

Vucic said economic growth may surpass 0.5 percent in 2015, driven by some “very important infrastructural projects that will start this year.”

More than a year after first announcing plans, the government is counting on the Belgrade Waterfront, a 3 billion- euro property development in cooperation with an U.A.E. investor.

Some new jobs and activity may be created an expansion of the Belgrade airport, where passenger numbers jumped 31 percent in 2014, he said. The government may award a contract for the construction project, Vucic said.

With measures to curb public spending, Serbia has little room to help citizens who borrowed in Swiss francs six or seven years ago to mainly buy homes.

Not Croatia

While the “problem is big, but not as big as in Croatia,” the government will try to “make it a bit easier” for those borrowers, he said, “without making massive changes because we are just about to get an IMF arrangement and we have to control our budget spending.”

The government plans to borrow between 1 billion euros and 1.5 billion euros this year, “which is not a huge amount of money,” he said. It also plans to sell Telekom Srbija AD and “finish all the procedures until September-October.”

Serbia promised the IMF to use half of the revenue from asset sales to repay some loans and the other half for “very important infrastructure projects,” he said.

To contact the reporters on this story: Olga Tanas in Moscow at otanas@bloomberg.net; Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net; Balazs Penz at bpenz@bloomberg.net Andrew Langley

Bloomberg