November 21, 2017 / 10:40 AM / a year ago

IMF says Bosnia must carry out stalled reforms to unlock fresh funds

SARAJEVO, Nov 21 (Reuters) - The International Monetary Fund warned Bosnia on Tuesday that it must meet the terms of its loan arrangement with the lender to get the programme back on track and boost economic growth and job creation.

The IMF halted the 550 million euro ($645.37 million) stand-by loan programme in February after Bosnian authorities failed to carry out economic reforms agreed in November last year.

The programme is part of a wider reform package devised by the European Union to guide the Balkan country towards faster integration with the bloc.

Bosnia’s two autonomous regions have made some progress on structural reforms but implementation of some of the key measures “has been much slower than expected”, the IMF said in a statement.

The Serb Republic and the Bosniak-Croat Federation must adopt 2018 budgets, while the central parliament has to pass a law raising taxes on fuel and another law on deposit insurance, it said.

Political bickering in the ethnically divided country has prevented the passage of the fuel tax law, which is required to unlock funding for transport infrastructure that would boost growth and create jobs.

“This is necessary to unlock the largest package of external financing available in recent times for critical public infrastructure investments,” Nadeem Ilahi, the head of an IMF team that completed a two-week visit to the country on Tuesday, said in the statement.

The IMF also said the Serb Republic and the Federation must take steps to ensure due diligence is carried out on the region’s two state-owned telecoms firms.

It said the Bosnian economy remained weaker than the rest of Eastern Europe although it has seen a cyclical recovery: exports and remittances have been increasing and inflation is expected to pick up in 2017.

The IMF distributes the loan payments to Bosnia’s central government in Sarajevo, but the country’s two autonomous regions are the principal beneficiaries of the aid.

They have factored the aid into their respective budgets but as the IMF cash has been frozen, both regions have had to resort to issuing domestic debt to cover the budget gap and finance maturing debt. ($1 = 0.8522 euros) (Reporting by Maja Zuvela; Editing by Susan Fenton)

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