Bosnia close to losing IMF deal, minister warns

Bosnia close to losing IMF deal, minister warns
By bne IntelliNews February 20, 2017

Bosnia & Herzegovina's deal with the International Monetary Fund (IMF) could be cancelled if the two parties do not reach an agreement on planned reforms by the end of March, the finance minister of Republika Srpska, Zoran Tegeltija, has reportedly warned. 

In September 2016, Bosnia and the IMF finally agreed on new 36-month deal, supported by a SDR443.04mn (about €550mn) Extended Fund Facility (EFF). The country had been trying for almost a year to secure a new IMF deal after the previous arrangement expired in June 2015. The new deal was expected to help the governments of Bosnia’s two entities – the Muslim-Croat Federation and Republika Srpska – patch their budget gaps and give them some stability over the next three years.

However, earlier this year the IMF put the loan agreement on hold as Bosnia had failed to implement reforms it had agreed with the fund. In January, Francisco Parodi, the IMF’s resident representative in Bosnia, said that the fund could delay the disbursement of the second loan tranche worth BAM155mn (€79.3mn) to Bosnia, after the country failed to meet the obligations.

“If nothing happens [by the end of March], it is virtually certain that the arrangement will be cancelled and it will be necessary to launch new talks on a new arrangement,” quoted Tegeltija as saying.

He blamed the authorities of Bosnia’s other entity, the Muslim-Croat Federation, and the state-level institutions for the situation, saying they have failed to adopt the necessary reforms.

Meanwhile, Parodi has said that the authorities have pledged to implement a set of measures, including cutting public spending, improving control of employment and increasing excise duties on oil.

However, the excise duty has not been increased due to objections from the country’s indirect tax authority. In December, Parodi warned again that the second tranche may be delayed if the country does not agree to hike excise duty by BAM0.15.

Parodi also has said that the authorities of the Muslim-Croat Federation should sign agreements with international advisers on analyses of two telecommunication companies – BH Telekom and HT Mostar – as a step towards their restructuring or the privatisation of the state’s stakes in them.

The state-level government is required to adopt a decision to cut hiring in the public administration. The parliament still has to vote on amendments to the deposit insurance law.

In November 2016, an IMF mission visited the country to discuss the first review of the new credit agreement with the Bosnian authorities, and said that the country should focus on improving the business environment in the country in order to help reduce the jobless rate and boost FDI inflows. 

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