The International Monetary Fund (IMF) will terminate its current three-year funding arrangement with Bosnia if the country fails to deliver on reform pledges by next month, local media reported today.
If local politicians aren't able to reach a consensus on fulfilling prior actions they committed to in the letter of intent submitted to the IMF last year, then the IMF will cancel the arrangement with the country, news daily Nezavisne quoted the RS finance minister Zoran Tegeltija as saying.
If this happens, Bosnia will have to open negotiations with the IMF on concluding a new funding arrangement, Zoran Tegeltija added.
He claimed that Federation of Bosnia and Herzegovina and the country's state-level government were responsible for stalling the deal, because they have not yet enacted several reforms agreed with the IMF including the adoption of an excise tax law.
The Republika Srpska, Tegeltija said, will continue to meet its obligations with funds raised via domestic bond auctions but it may also seek financing on international markets.
Earlier this month, the IMF said it has delayed the release of the second loan tranche under its funding arrangement with Bosnia because the country's authorities have failed to meet reform targets.
“We cannot expect the formal completion of the first review in February because there are delays in the completion of prior actions”, Francisco Parodi, the resident representative of the IMF in Bosnia, told SeeNews. “We are waiting for them to be completed for the IMF staff to recommend (Executive) Board approval of the first review,” Parodi noted.
In September last year, the IMF approved a three-year 553.3 million Euro loan to Bosnia and Herzegovina to support the country’s economic reform agenda.
The Executive Board’s decision enabled an immediate disbursement of about 79.2 million euro, while the remainder was said to be made available in 11 installments subject to quarterly reviews.
BiH hoped to receive the second tranche before the end of 2016 to finance budget deficit but the IMF refused to release the funds before seeing progress on reforms.
The global lender noted earlier it expects Bosnia to cut public debt, improve business climate, and secure financial sector stability.
