Bosnia signs USD 111mn loan with WB on public spending sustainability.

By bne IntelliNews June 4, 2010
The country is to receive USD 111mn (KM 177mn) loan from the WB group for improving public spending sustainability, in line with an agreement signed between Bosnia and the institution. The agreement was signed by state finance minister Dragan Vrankic and WB Bosnia office head Marco Mantovanelli. In particular, the loan is to be provided by two of the five institutions forming the WB Group - the IBRD is to provide a loan of USD 45mn (with interest rate - LIBOR at about 1%), while IDA - an interest-free credit in the value of USD 66mn. The IBRD credit is repayable in 25 years with a 10-year grace period, the IDA loan matures in 20 years with a 10-year grace period. Authorities have earlier decided to allocate 60% of the funds to the Federation entity and 40% - to RS. The loan provided by the WB is complementary to the IMF stand-by arrangement worth EUR 1.2bn. The focus of the reforms supported by this operation is to strengthen the targeting of a wide array of cash-transfer programmes to families and individuals, to better reach the most vulnerable in Bosnia. The objectives of the project are to increase social assistance to the poor, while reducing the fiscal deficit and creating fiscal space for poverty-reducing growth; to improve the structure and efficiency of public expenditures; and to reduce social contribution rates and pressure on private sector wages from faster wage growth in the public sector, thereby enhancing private sector competitiveness. The development policy operation followed the WB approval of a USD 15mn Social Safety Net and Employment Support Project in February to strengthen the institutional capacity necessary for implementing the reforms and providing employment services to active job-seekers among vulnerable groups. WB portfolio of active projects in the country, including this most recent one, totals 17, worth approximately USD 466.4mn.

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