Bosnia’s fourth attempt to meet requirements for IMF loan tranche fails

Bosnia’s fourth attempt to meet requirements for IMF loan tranche fails
By bne IntelliNews May 8, 2017

Bosnia & Herzegovina's parliament failed for the fourth time to adopt key legislative changes required by the International Monetary Fund (IMF) to disburse the second tranche under an agreement signed in 2016. Sarajevo is now close to the end of legal procedures that would allow it to finally approve the changes and save the deal.

Strong disagreements between Bosnian politicians are once again jeopardising the country’s agreement with the fund, even though the cheap funding it would provide is much needed by the governments of the two entities. The country lost its previous deal with the IMF and the reason was again the failure to carry out reforms pledged to the fund.

The Bosnian authorities have pledged to implement a set of measures, including to cut public spending, improve control of employment and increase the excise duties on oil, none of which have been completed.

The fourth attempt to adopt of the reforms required by the IMF ended on May 8 after the finance and budget committee of Bosnia’s lower chamber, the House of Representatives, gave a negative opinion on them, a statement on the parliament’s website said.

The negative opinion will be sent to the lower chamber, which should decide whether to take it into account or to approve the legislation changes at its session scheduled for May 10. The House of Representatives could ask the committee to discuss the amendments one more time, but if the committee again fails to approve them, they cannot be debated by the chamber any more. This would very likely mean the end of the deal and a very strong pressure on the budgets of the two entities as their governments will have to seek other funding options to cover their spending this year.

Previously, the House of Representatives failed to adopt the required reforms in April, but agreed to discuss them under a shortened procedure. Before that, the parliament’s other chamber adopted the changes, but approval from both chambers is needed for them to become law. The IMF said that completion of the first review of its agreement with Bosnia would be delayed significantly after the lower chamber failed to adopt the legislative amendments at an earlier session in March.

According to Klix.ba, the changes were not backed by the Bosniak MPs, while the Serbs and Croats voted for them.

In January, the IMF put the arrangement on hold for the same reasons and extended the deadline to mid April. The funding tranche was agreed in principle in September 2016, when Bosnia and the IMF agreed on a 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.

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