Bosnia-Herzegovina secures new IMF stand-by loan

By bne IntelliNews September 27, 2012

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The International Monetary Fund announced on September 26 that it has granted Bosnia-Herzegovina a new €405.3m stand-by loan in support of the government's programme to fight the economic slowdown.

The agreement is a rare victory for the government of a country still split into two semi-independent entities following the 1990s Balkan wars: the Muslim-Croat Federation and the Serbs' Republika Srpska. Negotiations on a new loan (a previous €1.2bn programme was frozen in 2010 because authorities had failed to carry out key fiscal and institutional reforms) resumed in June after a 16-month political crisis that was resolved when a new central government was formed in February.

The IMF executive board announced in a statement that it has approved the two-year loan, and released an initial installment of €60.8m. The remainding funds will be disbursed depending on successful quarterly reviews. "The program aims at countering the effects of the worsening external environment and addressing domestic structural weaknesses," it said.

Nemat Shafik, IMF deputy managing director, said that Bosnia-Herzegovina's "prudent" financial sector policies have helped the country weather the global financial crisis, but called for improved fiscal policy coordination. "In recent months, Bosnia and Herzegovina's economic recovery has been losing momentum and risks to the outlook have tilted to the downside. In this context, the authorities' comprehensive economic program for the period ahead is timely and welcome," Shafik said in the statement.

In July, the government announced that, as a condition for obtaining the loan, Bosnia's two semi-independent entities had pledged to revise budgets and implement structural reforms.

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