IMF unlocks Bosnia’s loan deal

IMF unlocks Bosnia’s loan deal
By Denitsa Koseva in Sofia December 28, 2017

The International Monetary Fund said it will unlock its loan deal with Bosnia & Herzegovina, which has been frozen since the beginning of 2017, as the country has met several conditions set by the fund. It is now expected to disburse the second tranche of €76mn in early 2018.

Although Bosnia’s two entities – the Muslim-Croat Federation and Republika Srpska – desperately need the cheap funds from the IMF, political disagreements have frozen key reforms for almost a year since the international institution finally put the three-year stand-by agreement on hold in January 2017.

Bosnia has only received the first tranche of the 36-month deal, which was signed in September 2016 and is supported by a SDR443.04mn (about €550mn) Extended Fund Facility (EFF).

“IMF staff and the BiH authorities have reached agreement, subject to approval by the IMF executive board, on policies that would allow IMF staff to recommend completion of the first review under the Extended Fund Facility (EFF) supported program. Consideration by the executive board, expected in early 2018, would follow the implementation of a number of conditions,” Nadeem Ilahi, IMF mission chief for Bosnia, said in a statement following the completion of a mission to Sarajevo on December 22.

The IMF required Bosnia to adopt changes that would increase excise duties on oil. Bosnia's two entities are also required to adopt budgets for 2018, while the state-level parliament must adopt new law on deposit insurance and the government of the Muslim-Croat Federation is required to finally launch a due diligence of two of its telecoms companies, BH Telekom and HT Mostar.

Earlier in December, Bosnia’s state-level parliament finally adopted the legislation changes allowing an increase of excise duties on oil, while Republika Srpska adopted its budget on time.

“The authorities are committed to implementing the remaining conditions in the coming days. The Federation of Bosnia and Herzegovina (FBiH) parliament is expected to adopt the 2018 budget in line with IMF staff recommendations. And, the FBiH government is expected to initiate the due diligence of two FBiH state-owned telecom companies, BH Telecom and HT Mostar,” the statement reads.

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 patch their budget gaps and give them some stability over the next three years.