Political instability in Bosnia & Herzegovina, along with the decision of International Monetary Fund (IMF) to once again put on hold its agreement with the country, are raising concerns for investments, rating agency Standard & Poor’s said. However, the country is still expected to post economic growth around 3% in each of the next three years and the rating agency confirmed its B/B ratings and stable outlook.

Bosnia, which is heading for general and presidential elections in early October, has once again stalled key reforms due to constant tensions and conflicts between top politicians and had been criticised by international institutions for the lack of any significant progress in the past year.

“Political tensions and divisive strategies will likely delay the forming of a functioning state parliament after the October elections, which, together, with a recent derailing of the International Monetary Fund (IMF) program raises concerns for investments, foreign investor sentiment, and structural reform capacity,” S&P noted.

On the other hand, Bosnia is expected to service its foreign debt despite political turbulence, and the real economy should retain a stable growth, while personal income level should improve.

If political developments in 2018 and 2019 lead to notable and extended government deadlock, produce public unrest, and reverse the progress made under the reform agenda so far, Bosnia’s rating will be downgraded.

Another possible reason for S&P to revise down the rating would be if the IMF does not resume its loan deal with the country.

In July, IMF decided to postpone the conclusion of a review of Bosnia’s third loan tranche as the country failed to complete its obligations. The deal was put on hold in 2017 due to unfulfilled obligations, but was unfrozen at the end of December and in February Bosnia received the second loan tranche.