IMF postpones decision on new loan tranche to Bosnia over spending hikes

IMF postpones decision on new loan tranche to Bosnia over spending hikes
By bne IntelliNews July 3, 2018

The International Monetary Fund's executive board postponed at the last minute a meeting on the conclusion of a review of Bosnia & Herzegovina's third loan tranche after the governments of Bosnia's two entities decided to increase spending above the agreed level, Reuters reported.

The deal, which would secure the country cheap fresh cash, was put on hold in 2017 due to unfulfilled obligations, but it was unfrozen at the end of December and in February Bosnia received the second loan tranche.

In May, the IMF urged the country to speed up reforms, but said that it will disburse the third tranche in the autumn, praising Bosnia’s advancement.

However, at the end of June the board decided to postpone its meeting after the governments of the two entities decided to increase public spending without coordinating this with the fund. In the Muslim-Croat Federation, the government adopted a law expanding benefits for veterans from the bloody 1992-1995 Bosnian war, while Republika Srpska decided to increase the minimal wage and pensions as of July 1.

"The IMF staff needs more time to evaluate recent cabinet decisions to increase veteran benefits and public sector wages," Francisco Parodi, the IMF resident representative in Bosnia, told Reuters.

If the IMF approves the spending increase, it will disburse around €38mn to Bosnia.

Meanwhile, the two entities have cancelled most of their securities auctions for this year, claiming they had higher public revenue. At the same time, Republika Srpska raised a €168.3mn Eurobond last month – the first placed by the entity so far.

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