New Borrowing: BiH to Take a 900 Million KM Loan from the IMF

Bosnia and Herzegovina will borrow 900 million marks from the IMF, a piece of news that emerged in the media after a meeting of the entity prime ministers and the chairman of the Council of Ministers in Banja Luka, reports the Patria News Agency.

They officially announced only that they had defined a common platform for negotiations with the IMF and the World Bank. The government of Republika Srpska neither confirmed nor denied reports of new borrowing.

The Minister of Finance and his assistants did not respond to calls and messages. Slobodna Bosna claims that for the first time since Dayton, BiH will not be negotiating a stand-by arrangement but a loan under so-called EFF conditions. Economists explain that these are approved only for countries willing to undertake deep structural reforms and eliminate the causes of fiscal instability.

"Extended Fund Facility, or in translation, extended-term funds, the IMF approves to countries that have problems with deficits and imbalances between imports and exports," said economic analyst Zoran Pavlović.

In short, BiH is seeking a 900 million mark loan from the IMF over 12 years. According to media reports, it would be disbursed over the next three years, and in return, the authorities in BiH would be expected to undertake 24 reforms to permanently eliminate the causes of the latent budget deficit.

"I fear that we have embarked on a process that will be very painful for all those working in public enterprises and administration, starting from salary reductions to finding ways to make utility costs and public enterprises owned by the government profitable," said Pavlović.

Money from stand-by arrangements is mainly used for short-term patching of budget holes, which economists vividly describe as taking painkillers for a toothache. For a long-term solution to these problems, the entity governments would have to complete the privatization process and reduce budget spending. Everything is expected to be discussed next week in Washington, ATV reported.