Bosnia hurries to draw first tranche of new IMF loan

Bosnia hurries to draw first tranche of new IMF loan
By bne IntelliNews September 6, 2016

The government of Bosnia & Herzegovina decided at an extraordinary session on September 6 to initiate procedures to draw the first tranche of a new loan from the International Monetary Fund (IMF) worth BAM154.155mn (78.82mn). The decision was taken ahead of a September 7 session of the IMF’s executive board, at which a new three-year agreement with Bosnia should be approved.

Bosnia and the IMF have already agreed the parameters of a new three-year deal with the fund, supported by a SDR443.04mn (about €550mn) Extended Fund Facility (EFF).

Of the total BAM154.155mn tranche, two thirds are expected to go to Bosnia’s bigger entity, the Muslim-Croat Federation, while the remainder will be allocated to the other entity – Republika Srpska, the government said in a statement.

“It is expected that the first tranche will be allocated to BiH on September 9, 2016, after the executive board of IMF approves the new extended arrangement with BiH on September 7,” the statement reads.

In May, the IMF and Bosnia finally agreed on a new deal following a year of difficult negotiations after the country’s previous arrangement expired in June 2015. The new deal will help the governments of Bosnia’s two entities – the Muslim-Croat Federation and Republika Srpska – to patch their budget gaps and will give them some stability in the next three years.

However, the country came close to losing the new agreement with the IMF. In July, Bosnia missed the technical deadline to send the letter of intent as the prime minister of the Federation, Fadil Novalic, and the head of the state-level government, Denis Zvizdic, declined to sign it until Republika Srpska finally agreed to the adaptation of the country’s Stabilisation and Association Agreement (SAA) with the EU and agreed on a mechanism for working coordination with the EU. On July 18, the country initialed the SAA adaptation. At the end of July, Bosnia finally sent a properly signed letter of intent.

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