July 9, 2018 / 3:35 PM / in 8 months

IMF warns Bosnia over law on war veterans' benefits

SARAJEVO, July 9 (Reuters) - The International Monetary Fund (IMF) warned a Bosnian region’s authorities on Monday against new legislation to increase war veterans’ benefits, saying it could threaten long-term financial stability.

The lender’s Executive Board last month postponed at the last minute a final meeting for a review of Bosnia’s loan programme, which would unlock fresh aid, over cabinet decisions to increase benefits for veterans from the 1990 war and public sector wages.

Bosnia is made up of two autonomous regions, the Bosniak-Croat Federation and the Serb Republic, which are the main recipients of the lender’s aid.

The IMF said the Serb Republic has violated terms agreed under its loan deal after its parliament last week approved a bill raising wages by up to 12.5 percent.

But even more concern is caused by the Bosniak-Croat Federation’s plan to approve legislation increasing veteran benefits in parliament on Tuesday, IMF Resident Representative Francisco Parodi told Reuters.

Parodi said the legislation was flawed because it aims to expand veterans benefits although their final number was still not known nor was the total cost of the new rights.

“There is no registry of veterans more than 20 years after the war ended,” Parodi said. “This law opens the door to fraud and corruption.”

War veterans in the Federation have often protested demanding benefits for unemployed former soldiers and a unified register of all veterans.

Both sets of laws in the two regions are seen as sweeteners ahead of parliamentary and presidential elections in October.

“These new laws passed ahead of the election are jeopardising fiscal stability and will have lasting consequences,” Parodi warned.

He said a new IMF mission would have to visit Bosnia to look at the effects of the legislation which puts at risk the completion of the review of the country’s 553-million-euro ($650.05 million) loan programme.

“This risk is jeopardising the objectives of the programme,” Parodi said. “The IMF takes this very, very seriously.”

The IMF in February disbursed a 74.6-million-euro tranche to Bosnia after its aid programme was unblocked following an 18-month halt over delays to reform. ($1 = 0.8507 euros) (Writing by Daria Sito-Sucic; Editing by Richard Balmforth)

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