Bosnia’s Federation plans to borrow a total of BAM 655mn (EUR 335mn) in 2014 according to next year's draft budget, daily Nezavisne Novine reported. The borrowing will equal to 2.2% of the full-year GDP forecast, according to IntelliNews calculations.

Out of the total, the IMF will provide BAM 299mn under the country's EUR 390mn stand-by agreement, whereas BAM 46mn will come from the World Bank. In addition, the Federation will issue BAM 310mn in short-term and long-term securities on the domestic market. The funds will be used to finance debt repayments as well as other expenses such as rising spending for salaries and employment, the report read. According to the 2014 budget draft, the Federation will increase public wages spending by BAM 2.5mn compared to this year’s plan to BAM 190mn.

The entity’s government adopted on November 6, the 2014 budget draft, aiming for BAM 2.36bn in revenue, including income from borrowing, up 6.5% compared to this year’s plan. The Federation typically plans balanced budgets, meaning equal size of revenue and spending – in this case BAM 2.36bn.

Bosnia’s Foreign Trade Chamber analyst, Duljko Hasic, was quoted as saying that the Federation lacks an effective debt management system and strategy, adding that rising internal indebtedness could jeopardise the entity’s financial stability. The Federation’s public debt rose to 37.1% of GDP at end-2012 from 35.7% a year earlier and 27.6% at end-2008, according to the government’s Directorate for Economic Planning (DEP). The DEP also noted that borrowing costs, mainly on the domestic market, have increased significantly since the start of the crisis and pushed the overall debt level up.

The Federation, together with the Serb Republic makes up Bosnia.