Bosnia and the International Monetary Fund agreed a €1.2 billion ($1.61 billion) deal over three years to lessen the impact of global economic crisis, Bosnia’s Prime Minister said on Tuesday.
“After hard work we have happy news,” Nikola Spiric told a news conference. “We have a letter of intention which means that we shall have an arrangement with the IMF.”
The agreement was postponed from the last week to give Bosnian officials more time to pin down technical details and government guarantees about the implementation of policies requested by the lender under the arrangement.
The agency has stepped up its presence in the Balkans as nearly all states are entering recession and many seeking its help, although they had hoped the region could avoid the worldwide downturn.
An IMF mission conducted the three-week long negotiations with various layers of Bosnia’s complex governance, primarily with governments of its two autonomous regions, the Muslim-Croat federation and the Serb Republic.
“We agreed that two thirds of the funds will go to the Muslim-Croat federation and one third to the Serb Republic,” Spiric said.
The Muslim-Croat federation is under financial strain because of generous benefits granted as election sweetener to social categories derived from the 1992-95 war, such as veterans, invalids and families of fallen soldiers.
The Serb Republic is in a more favorable situation thanks to privatization receipts from the previous years and tighter budget control but it also needs reserves as the effects of the recession become more visible.
The Muslim-Croat federation will have to make savings of BAM 500 million ($343 million) out of the total of BAM 696 million or 3% of GDP, estimated as Bosnia’s consolidated budget deficit in 2009.
The National Fiscal Council has projected an economic contraction of 1.5% in 2009 and flat growth in 2010. The IMF’s latest forecast for Bosnia this year was a 3% contraction of GDP. (Reuters)