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IMF approves 553-mln-euro loan arrangement for Bosnia

Bosnia’s two autonomous regions need IMF cash to secure their financing needs as they are linked via a weak central government

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The International Monetary Fund said its executive board on Wednesday approved a three-year extended loan arrangement for Bosnia worth about 553.3 million euros ($619.7 million) to support the country's economic reform agenda.

The decision will enable immediate disbursement of about 79.2 million euros ($88.7 million), the IMF said, with the rest available in 11 installments subject to quarterly reviews.

The extended fund facility deal was initially agreed in May by IMF staff and authorities of Bosnia's multiple governments in May. The deal carried a 4.5-year grace period in exchange for a set of structural reforms and measures to safeguard financial stability.

The program will replace a 33-month, $720 million program which expired in June 2015 after the IMF froze it because of delays to pledged reforms by the government.

Bosnia's two autonomous regions, the Bosniak-Croat Federation and the Serb Republic, whose total budget deficit amounts to about 1 billion Bosnian marka ($573 million), need IMF cash to secure their financing needs. The regions are linked via a weak central government.

But in a surprise move in early July, Bosniak top officials declined to sign the letter of intent in what appeared to be an internal spat, prompting the Board to delay its consideration of the deal, originally scheduled for mid-July. The officials signed the letter at the end of July.

IMF officials who visited Sarajevo in May said the new program would focus structural economic reforms, including improvement of the business environment, restructuring and privatization of state-owned enterprises and tax cuts to encourage employment.

They said Bosnia also had agreed to a gradual fiscal consolidation to reduce public debt, to shrink Bosnia's complex government, and better target government spending.

The measures sought by the IMF are part of a wider programme the European Union wants Bosnia to implement to further its bid to join the bloc, particularly on social welfare, pensions and health funding.

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