Belgrade - The Serbian government postponed its regular meeting Thursday, amid tensions in the volatile ruling coalition over excessive spending plans made before the financial crisis exploded.

Prime Minister Mirko Cvetkovic's cabinet was expected Thursday to launch an arrangement with the International Monetary Fund (IMF), but was apparently unable to agree on where to make spending cuts.

The junior partner in Cvetkovic's coalition, the pensioners party PUPS, adamantly insists on its election promise of a 10-per cent increase of pensions.

IMF experts warned that Serbia - under growing pressure of its swollen current account deficit, declining investments and increasingly expensive credits - simply must reduce spending.

Under the new circumstances, Serbia must cut the deficit on its account from the current 18.5 per cent of the gross domestic product by saving money, instead of by borrowing or from investments.

The other, even more unpopular option is to save enough is to freeze salaries in the public sector in 2009, local reports said.

The cabinet session was delayed by a day, without an immediate explanation. Cvetkovic's fragile coalition, produced after early polls in May, has a razor-thin majority in the national parliament

Local economists say Belgrade has no alternative but to enter the programme with the IMF, which does not include a standby credit, but would signal prudent economic policy to investors and creditors.

Owing to the central bank's restrictive policies, Serbia so far remained shielded against the worst of the global financial crisis.

That is however not enough, as gaping deficits started affecting the stability of its currency, which fell to a two-and-a-half year low against the euro last week, forcing the central bank to intervene from its precious foreign exchange reserves. (dpa)