December 22, 2017 / 7:34 PM / 2 years ago

UPDATE 1-IMF to unblock loan deal for Bosnia

* IMF agrees to conclude 1st review under its loan deal for Bosnia

* Expects to disburse 76 million euros early next year

* Political bickering froze IMF programme for nearly a year (Updates with interview with IMF top official for Bosnia)

By Daria Sito-Sucic

SARAJEVO, Dec 22 (Reuters) - The International Monetary Fund said it would unblock its loan deal for Bosnia which has been frozen for almost a year after agreeing to conclude the first review under its three-year 550 million euro ($651 million) programme. Nadeem Ilahi, head of the IMF mission for Bosnia, said in an interview an agreement clinched on Friday would unlock further disbursements under the Extended Fund Facility approved in Sept. 2016.

The IMF disbursed 79.2 million euros last year to Bosnia’s two autonomous regions, the Bosniak-Croat Federation and the Serb Republic, but could not complete the first review due to government failure to implement agreed economic reforms.

But last week, after months of political bickering, the country’s parliament adopted a long-delayed set of laws on excise taxes, key for disbursement of the lender’s additional 76 million euros. [ID: L8N1OF2ZS]

The IMF sees the legislation as a game-changer that will unlock about 800 million euro funding for infrastructure projects from international lenders, such as the European Bank for Reconstruction and Development and the European Commission. “Once you start executing highway investment through the excise duty law you’ll see further impact on economy, not just growth but job creation,” Ilahi said.

He said that before the IMF Executive Board could conclude the review and approve disbursement, the Bosniak-Croat Federation needed to pass its 2018 budget and start due diligence on its two telecoms companies.

“We are waiting for those two signals to basically move forward,” he said, adding he expected the Board’s approval early next year.

Ilahi also said he did not expect political blockades in 2018 because most of the “heavy structural measures” required under the programme were already adopted.

“Now we are at the stage where it should be relatively easier to complete each review because the big effort is done,” he said, adding that forthcoming measures required for the financial sector should be less difficult and “authorities should have more control over this process”.

He said the IMF expected the Bosnian economy to grow by 3.5 percent in 2018 and by 4 percent in the following years.

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

$1 = 0.8446 euros Reporting by Daria Sito-Sucic; Writing by; Ivana Sekularac and Daria Sito-Sucic; Editing by Ralph Boulton;

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