IMF puts loan deal with Bosnia on hold over lack of reforms

IMF puts loan deal with Bosnia on hold over lack of reforms
By bne IntelliNews February 3, 2017

The International Monetary Fund (IMF) has put its loan agreement with Bosnia & Herzegovina on hold as the country has failed to implement reforms it had agreed with the fund, Reuters reported on February 2.

In January, Francisco Parodi, the IMF’s resident representative in Bosnia, said that the fund could delay the disbursement of the second loan tranche worth BAM155mn (€79.3mn) to Bosnia, after the country failed to meet the obligations.

"We cannot expect the formal completion of the first review in February because there are delays in the completion of prior actions. We are waiting for them to be completed for the IMF staff to recommend board approval of the first review," Reuters quoted Parodi as saying.

According to Parodi, five out of 11 reforms have not been completed, including higher taxes on fuel to help build a pan-European highway, which would unlock about BAM1bn from the European Bank for Reconstruction and Development (EBRD).

In November 2016, an IMF mission visited the country to discuss the first review of the new credit agreement with the Bosnian authorities, and said that the country should focus on improving the business environment in the country in order to help reduce the jobless rate and boost FDI inflows. 

In September 2016, Bosnia and the IMF finally agreed on 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 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.

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