IMF urges Bosnia to complete pledged reforms within weeks to keep loan deal

IMF urges Bosnia to complete pledged reforms within weeks to keep loan deal
By Denitsa Koseva in Sofia November 22, 2017

The International Monetary Fund (IMF) again warned Bosnia & Herzegovina that it must complete pledged reforms soon to keep its loan agreement and get fresh cash, in a statement issued upon the completion of a mission to the country on November 21.

Although Bosnia’s two entities desperately need the cheap funds from the IMF, political disagreements have frozen key reforms for months and the international institution finally put the three-year stand-by agreement on hold in January.

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

To unfreeze the deal, Bosnia must shortly adopt legislative changes and complete other promises within weeks.

“To bring the programme back on track, the completion of these prior actions in the coming weeks is essential,” the IMF’s statement reads.

They include adopting changes that would increase excise duties on oil. “This is necessary to unlock the largest package of external financing available in recent times for critical public infrastructure investments. Continued delay has slowed the economic recovery and affects prospects for faster growth and job creation in future,” the statement said.

In September, rating agency Standard & Poor's warned that the country risked losing external financing after its deal with the IMF was put on hold.

International institutions have put pressure on Bosnia in the past month to adopt the required changes. EU Commissioner for Neighbourhood Policy and Enlargement Negotiations Johannes Hahn’s office said in a September statement that the country must adopt the changes by the end of the month in order to unlock €250mn funding from the European Union for infrastructure projects.

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 telecom companies – BH Telekom and HT Mostar.

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.