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Bosnia Struggles to Get New IMF Loan

April 20, 201611:27
Bosnian leaders will soon start debating the last conditions required for the country to get an urgently needed IMF loan.
 
 Bosnian PM Denis Zvizdic | Photo: Anadolu

Bosnia’s decision-makers will shortly debate the last remaining conditions required by the International Monetary Fund, IMF, to access a new program worth about 500 million euros, officials said.

The funds are needed to cover at least a part of Bosnia’s growing budget deficit.

Without it, Bosnia faces a liquidity crisis, especially in the Serb-dominated entity, Republika Srpska.

The entity, one of two in Bosnia, could run out of money in months to pay salaries, pensions, social benefits and other costs, local and international officials confirmed to BIRN.

The new IMF program should be finalised during the visit of an IMF delegation at the end of May.

The head of the IMF delegation to Bosnia, Francisco Parodi, outlined the basic elements of the program to BIRN in February but the final details are to be agreed in May.

Bosnian officials voiced optimism about the deal on Tuesday. However, differences remain in the positions of Bosniak, Croat and Serb politicians.

Bosnian Prime Minister Denis Zvizdic said the IMF wants to see tougher banking regulations, including the possible creation of a state regulatory authority.

“There must be some kind of regulatory agency that will regularly supervise the activities of active banks,” Zvizdic told the Sarajevo-based newspaper Faktor on Tuesday.

Zvizdic argued that such measures would prevent problems like the failed Pavlovic Bank, Banka Srpske and Bobar Bank from occurring.

All three banks, all located in Republika Srpska, were wrecked by bad management and possible corruption and reported heavy losses. Bobar Bank declared bankruptcy in December 2014. “We cannot allow something like this to happen again,” Zvizdic said.

Bosnia has two regulatory agencies for banking but they operate only at the level of the two entities.

However, Bosnian Serb officials – always wary of moves towards centralisation – oppose the creation of a regulatory agency at state level.

“I am against this idea”, Mladen Ivanic, the Serbian member of the three-member Bosnian Presidency, said on Monday.

He said that he expected the Republika Srpska government to assess “the responsibility of the entity’s banking agency for the collapse [of the banks].”

Aleksandar Ljuboja, an economist from Banja Luka, told BIRN that while regulating the banking sector needed improving, it was necessary to avoid the topic gaining any “political connotations”.

He also maintained that a new IMF loan was the wrong solution. “Contracting new loans to support our budget spending is not a good solution for Bosnia’s economy,” Ljuboja said.

“The country needs first of all to increase production by increasing domestic investment,” he added.

Nonetheless, obtaining more money to support the budget will be of primary importance, especially for the RS government ahead of October’s local elections, Tanja Topic, a political analyst from Banja Luka, told BIRN.

“This money will help the government pay pensions and salaries, improving its position during the election campaign,” Topic noted.

In addition to a new loan from the IMF, the authorities in Banja Luka are planning to emit five-year bonds worth 40 million KM [20.4 million euros] at the beginning of May, the RS Ministry of Finance confirmed to BIRN.