Many countries want to pull out of IMF assistance and aren’t pleased with the conditions set by this organization; furthermore after it terminated cooperation with the IMF, Hungary started pulling out of an economic crisis which has made other countries think hard about their agreements.
Professor of the Faculty of Economics, University of Banjaluka, Gordana Cenic Jotanovic, said that whoever enters the IMF machine can hardly get out of it. She explained that usually the only way out is hitting rock bottom and bouncing back, which she believes will happen to B&H.
World Bank loans require concrete projects and that money cannot be used to cover budget deficits. However, countries are beginning to reject IMF loans because it has become clear to them that these loans wont save them from an economic crisis.
Economists warn that the popular stand-by arrangements are used for temporary bridging financial problems but that problems can not be solved by constant borrowing, instead they are accumulated.
Bosnia and Herzegovina has become more vocal recently saying that the existing credit arrangements could be discontinued due to political demands set by this international financial institution. Namely, in order to obtain a new IMF tranche B&H must adopt a new labor law by May, amend the Law on Corporate Income Tax and increase the excise tax on oil and alcohol.
A number of economists believe that if the IMF arrangement isn’t broken off now, the situation will get worse with time.
IMF insures that it will get its money back with a system alike blackmail, however this is made difficult if public spending increases, explained Assistant Professor at the Faculty of Economics in Banjaluka, Jelena Tesic.
If a country is unable to service its international credit obligations, the IMF and other global financial institutions will gladly grant them a reprogramming of these obligations, because there is enough money in the global financial market.
However, Jotanovic said, that the interest rate they will get for the money, no matter how high it is, will be higher than that on the domestic financial market, this resulting in an even bigger economic crisis.
