Bosnia hopes to define the tranches of a new agreement with the IMF in May, with the arrangement expected to total BAM1.05bn (€540mn), local TV channel N1 reported. The country plans to send letter of intent to IMF’s executive board, which should be first approved by the governments of the two entities making up Bosnia – the Muslim-Croat Federation and Republika Srpska, and by the state-level government.
Bosnian local governments rely on IMF funding to patch their budget gaps. In November, an IMF mission to Bosnia concluded that the country’s authorities need to complete their 2016 budget drafts and finalise a number of reform plans in order to comply for new deal.
Before that, during its previous visit in June, the IMF concluded that Bosnia needs more time to complete a number of policies in several areas, including measures to improve the functioning of the labour market, strengthen tax collection, enhance bank oversight, and improve the business environment, in order to comply for a new agreement. The previous agreement expired at end-June. Before that, in January, the IMF decided to delay the disbursement of a loan tranche because of lack of reforms.
N1 reported that the new loan agreement with the IMF would have a five-year grace period, 10-year repayment period and a 0.6% annual interest rate.
Bosnia and the IMF signed a 24-month €390mn stand-by agreement in September 2012 but extended it by nine months and augmented it by €153.1mn in January 2014 to meet additional financing needs. In June 2014, the IMF lifted the deal again by a further €95.7mn to help the country cope with the damage wreaked by the mid-May floods. After the two hikes, the size of the deal reached €631.6mn, or 330% of Bosnia's IMF quota. Also in June, the fund disbursed a €191.4mn instalment to Bosnia, including the €95.7mn augmentation. The last tranche brought the total disbursements under the arrangement to €478.5mn.
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