- Category: Economy
- Published on Thursday, 14 May 2015 12:48
After a two-week mission to Bosnia, the International Monetary Fund said it was more optimistic about the economy - although fresh financial assistance would still depend on reforms.
After surveying Bosnia's fiscal, economic and social situation over the last two weeks, an IMF mission has expressed mild optimism about signs of recovery - while underlining the need for urgent reforms if Bosnia wants further financial support.
“First reforms, then the next tranche,” the Banja Luka daily Nezavisne Novine reported on Wednesday.
Bosnia initialled its current Stand-By Arrangement, SBA, with the IMF in September 2012, but constant political quarrels ahead of 2014 general elections delayed or blocked the reforms it was supposed to undertake.
The IMF then halted payments to Bosnia last September, which led to a shortfall in the agreed IMF disbursements. Out of the 700 million euro agreed under the current SBA, the IMF so far gave Bosnia only 530 million.
In Sarajevo on Tuesday, the head of the IMF mission, Ron van Rooden, said the existing SBA remains blocked because the IMF “did not see enough efforts [by Bosnia] to implement the reform agenda”.
Since the current SBA with Bosnia expires at the end of June, the IMF, the European Union and the World Bank will be work to prepare a new loan arrangement, which Bosnia desperately needs to cover a growing budget deficit.
Continued financial support is one of the key elements of EU’s new approach towards Bosnia, which is focusing on improving the economic and social base of the country rather than on reforming constitutional arrangements.
This will be underlined through the Stabilisation and Association Agreement, SAA, which will become effective as of June.
In meetings with the state and the two entity governments over the past two weeks, as well as at a joint retreat on Mt Jahorina near Sarajevo on Sunday and Monday, the IMF, the World Bank, the EU, the EBRD and local politicians discussed Bosnia’s future reform agenda.
This will include reforms of the administration, health care, pension funds and the labour laws, which have already become a point of disagreement between the IMF and employers’ associations on one side and trade unions on the other.
Ron van Rooden stressed that IMF will not even discuss payment of the current arrangements, or prepare new financial arrangements, until Bosnia initiates some of those reforms.
However, he also said there were indicators that Bosnia’s economy was not so damaged by last year’s catastrophic floods as was first thought, and that the economy is showing signs of recovery.
“After these difficult years, the recovery is showing signs of taking a firmer hold. As economic activity is projected to pick up in Europe, growth in Bosnia and Herzegovina is expected to rebound to over 2 per cent this year,” Rooden said, adding that it still “substantially lags behind” the rest of the region and Europe.
“An ambitious policy agenda is necessary to accelerate growth and reduce unemployment, while maintaining macroeconomic stability,” he concluded in his statement.
Elvira M. Jukic