Home Economy IMF to halt aid to Bosnia until agreed policies implemented

IMF to halt aid to Bosnia until agreed policies implemented


The International Monetary Fund will hold off on disbursing the next tranche of Bosnia’s aid program until the Balkan country implements agreed economic policies, most likely after the October election, a senior IMF official said on Friday.

An IMF mission visiting Bosnia could not conclude the eighth review of its 380 million euro ($487.92 million) standby arrangement for Bosnia, in place since September 2012, said Ron van Rooden, who headed a 10-day mission.

“We have a number of outstanding issues, commitments on the standby agreement, where things still need to be done,” Van Rooden told Reuters in an interview.

“We see a hole emerging in the budgets so we would like to see still an effort from the governments to compress non-priority spending, not related to addressing the impact of the floods,” he added.

Van Rooden said the IMF would revise its target ceiling for Bosnia’s budget deficit this year to 2.5-3 percent of GDP, from 2 percent previously.

The IMF doubled its typical aid tranche in June to about 191 million euros to help Bosnia cope with damage from devastating floods in May, estimated at about 2 billion euros.

Bosnia’s two autonomous regions also needed to improve cooperation in identifying tax evasion and improving tax compliance, and strengthen banking supervision, Van Rooden said.

If Bosnia passes the review, the IMF’s executive board would distribute around 67 million euros at the end of October to help the two regions plug their budget deficits.

“There is still time … We recognize there are elections now but we want to see the measures (in place) that governments themselves can do,” Van Rooden said.

On a positive note, he said Bosnia’s economy seemed to be more resilient to the impact of the flooding, with industrial production, exports and tax revenues picking up.

“As a result, we still project a modest but positive growth rate of GDP (for 2014) of close to 1 percent,” Van Rooden said, revising up the IMF’s previous forecast, made in May, of around 0.5 percent. But he warned that a delay in large projects due to the flooding would have a negative impact on the economy.

“Emergency assistance has been coming in but bigger amounts, bigger projects for real reconstruction is clearly taking more time and we don’t see any of this money coming in this year,” he said. “That will slow the recovery of the economy.”

source: Reuters


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