Bosnia gets new IMF stand-by loan in the ammount of EUR405m

The International Monetary Fund granted Bosnia-Herzegovina a EUR405.3m stand-by loan in support of the government's programme to fight the economic slowdown. The new agreement is a rare victory for the government of this country that is divided into two halves following the 1990s Balkan wars: a Bosnian Muslim-Croat federation and a Bosnian Serb Republic. Negotiations for a new loan (the previous EUR1.2bn one 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 approved the two-year loan, releasing an initial installment of EUR60.8m, with the remainder to be disbursed depending on successful quarterly reviews, the IMF said in a statement.

"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 the country's "prudent" financial sector policies had 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 a new IMF loan, Bosnia's two semi-independent entities -- the Muslim-Croat Federation and the Serbs' Republika Srpska -- had pledged to revise budgets and implement structural reforms.

The full press release follows:

The Executive Board of the International Monetary Fund (IMF) today approved a 24-month Stand-By Arrangement (SBA) for Bosnia and Herzegovina in support of the governments economic program for 201214. The program aims at countering the effects of the worsening external environment and addressing domestic structural weaknesses. The Boards decision enables the initial disbursement of SDR 50.73 million (about €60.8 million or US$78.1million), with the remaining amount to be phased in over the duration of the arrangement, subject to successful completion of quarterly reviews.

The Executive Board also completed today the 2012 Article IV Consultation with Bosnia and Herzegovina, which discusses economic policies from a medium-term perspective. The Article IV Consultation usually occurs on an annual or biannual cycle for all IMF member countries, and is distinct from the approval of the SBA. (continue reading...)