Bosnia, IMF Agree €1.2 Bln Stand-by Deal

resizer10The International Monetary Fund, IMF, has agreed to support Bosnia’s struggling budgets with €1.2 ($1.61) over the next three years, as long as the country reins in its public spending.

“Consideration by the (IMF’s Executive) Board will follow the implementation of a number of measures mainly on the fiscal front over the next several weeks,” media on Wednesday quoted a statement from IMF’s Deputy Managing Director Murilo Portugal.

The deal was finalised on Tuesday afternoon, after lengthy tough negotiations. But experts and analysts expressed concerns over the capacity of local leaders – especially in the troubled Bosniak (Bosnian Muslim)-Croat Federation – to implement the required reforms and to the survive social unrest such reforms would certainly trigger.

“The federal government does not have the capacity and integrity to implement this,” a leading Bosnian economists, Fikret Causevic, told the Balkan Insight.

Pending successful implementation of agreed fiscal reforms, the IMF’s funds will be disbursed in three tranches over the next three years. This could happen as early as August, officials said.

Two-thirds of the agreed resources will go to Bosnia’s Bosniak -Croat Federation, while the remaining third will go to the other Bosnian entity of Republika Srpska.

In order to get these funds, the Bosniak-Croat federation will have to make the biggest reduction and curb its budget by €207 million, Republika Srpska will have to reduce its spending by €73 million, while budgets of the state and Brcko district will have be shaved by €20 and €5 million respectively.

The agreed reforms should not be problematic for all but the Federation, which has been facing growing social unrest over the perceived ineffectiveness of its government and parliament in mitigating the negative effects of the current economic crisis.

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