BELGRADE, Serbia (AP) -- Serbia reached a deal with the International Monetary Fund to continue to access the euro2.9 billion ($4.25 billion) emergency loan which was frozen because of Belgrade's failure to plan budget cuts, officials said Wednesday.

The IMF in August suspended Serbia's access to the two-year standby loan agreed in April despite some encouraging signs that Serbia's recession-hit economy was recovering.

"An IMF staff mission and the Serbian authorities have reached agreement, subject to approval by the IMF management and executive board," IMF's chief negotiator Albert Jaeger said Wednesday.

He said that in the next two weeks the Serbian government intends "to implement several agreed measures, including the submission of the 2010 budget to Parliament."

Jaeger said that most targets under the original standby program have been met by Serbia, with the exception of the fiscal deficit "which was exceeded due to revenue shortfalls."

He said that it was agreed that the budget deficit for 2010 would amount to 4 percent of GDP with Serbia's government pledging to implement several spending reforms, including layoffs in government administration and the freezing of pensions and salaries in the public sector.

Serbia has already drawn euro788 million from the original IMF loan. Jaeger said that the latest agreement allows Serbia to withdraw the remaining amount in equal installments until April 2011, when the standby deal expires.

Serbian officials said they will tap the loan if and when the government needs to boost foreign currency reserves.

"We will not take the funds just for the sake of their withdrawal because this costs," said Serbia's National Bank Governor Radovan Jelasic said.

He said that the current foreign currency reserves have grown to euro9.7 billion due to the country's modest economic recovery amid the global financial crisis.

The IMF expects Serbia's economy to grow by 1.5 percent in 2010 after contracting by 3 percent in 2009.

"The standby agreement has helped Serbia achieve a number of goals," Jaeger said. "Financial tensions have eased, the output decline has been contained and inflation is falling."

However, he added that due to Serbia's low export base and its undersize private sector, its economy "may receive limited benefits from the incipient global recovery."

The economic downturn has caused Serbia, Ukraine, Nigeria, Pakistan, Sri Lanka, Mexico, Iceland, Belarus and two EU nations -- Hungary and Latvia -- to seek IMF help.