IMF May Delay Second Bosnia Tranche

The International Monetary Fund, IMF, could delay the release of the second installment of its stand-by deal with Bosnia, an official said.

“I have a feeling that the second installment will be postponed,’’ Mustafa Mujezinovic, the prime minister of Bosnia’s Croat-Bosniak (Bosnian Muslim) entity told journalists.

An IMF delegation arrived in Bosnia last week to start the first quarterly review of the country’s progress in fulfilling terms for a 3-year stand by arrangement worth 1.2 billion euros.

Bosnia has already received 202 million euros from the loan while the reminder will be provided in installments dependent on quarterly reviews.

The IMF has agreed to provide the first three installments of the loan for direct budgetary support, dependent on the implementation of a number of cost-cutting measures. The first installment helped the governments in Bosnia pass rebalanced 2009 budgets in August.

But as the revenues in the Croat-Bosniak federation, which is due to receive two thirds of the loan, have fallen by about 18 per cent in the first three quarters of this year, the region’s government will have to restructure the budget again.

At the same time, the government increasingly struggles to implement its decision to cut by 10 per cent all budgetary payments.

Early in October, Bosnia’s Croat-Bosniak parliament caved in to decorated war veterans’ demands ordering the government to reverse its plan to cut their benefits by ten per cent and on Wednesday about a thousand war invalids and demobilized soldiers protested on the streets of Sarajevo against reductions in their benefits.

“The whole stand-by arrangement will be under question if we fail to implement all the (cost-cutting) measures regardless of how painful and difficult they are,” the finance minister of Bosnia’s Croat-Bosniak entity told Bosnian television on Wednesday.

“We are struggling to help the people, this is a very bitter medicine, but it can help us heal,” Mujezinovic said in the same program.

“If the (stand-by) arrangement fails, the Federation will turn into a twilight zone,” he added.