Parodi for Patria: Authorities have several weeks to meet conditions for IMF funds

Francisco Parodi, the IMF's resident representative in BiH, explained to the Patria news agency that the BiH authorities have been given a period of several weeks to fulfill prior actions so that the IMF can submit its recommendation regarding the conclusion of the first review, otherwise the review conditions will be renegotiated. The amount in question is 150 million KM. 

Parodi stated that the authorities and IMF staff have reached an agreement on several prior actions necessary for concluding the first review under the EFF.

- These measures will not only result in the release of the second tranche but, most importantly, will benefit BiH and help increase growth and create new jobs.
- The timeline for fulfilling the remaining prior actions depends on the authorities. If the prior actions, which are a prerequisite for our board to consider the first review, are not fulfilled in the next few weeks, then the first review and its conditions will be renegotiated, and the timeline for disbursement of funds will change. Future disbursements will depend on reaching an agreement with the BiH authorities and progress in the field of reforms.

The three prior actions related to the adoption of the 2017 budgets for BiH institutions and entities.

- These budgets are fully financed, increase the effectiveness of the authorities, and redirect resources from current spending to much-needed public investments in infrastructure. These budgets also have strict limits on total wage expenditures, as wage spending needs to be reduced in the medium term to free up more resources for investments. Additionally, the BiH institutions have also committed to adopting a decision at the Council of Ministers that imposes further controls on new hiring, which is a specific prior action that has not yet been fulfilled – says Parodi.

Second, the RS authorities adopted amendments to the Corporate Income Tax Law, which also constitutes a prior action.

- The amendments achieve harmonization of this law with the Corporate Income Tax Law in the FBiH. Harmonization of regulations is important here because multiple rules and inconsistent regulations deter investors who would create jobs here across BiH. The amendments also simplify the rules, facilitate their application, which helps reduce tax evasion.

Third, the authorities committed to increasing the excise duty on petroleum products, including liquefied petroleum gas and biofuels, by 15 fening per liter.

- This prior action has not yet been fulfilled. The additional revenues collected from this basis would be directed to entity highway and road companies to ensure sufficient financing for highway construction projects, which again represent the largest public investment projects in the country and are crucial for stimulating growth. 

Fourth, the Federation authorities committed to signing contracts with international advisors to conduct operational and financial due diligence for BH Telecom and HT Mostar with the aim of restructuring and/or selling shares.

- The ultimate goal of this measure is to improve the efficiency and profitability of these two companies. This prior action has not yet been fulfilled.

And finally, the authorities also committed to prior actions regarding the adoption of new entity laws on banks, amendments to entity laws on the Banking Agency, and amendments to the law on deposit insurance in BiH.

- This is a very ambitious undertaking, and I am pleased that the National Assembly of Republika Srpska has already adopted the new Law on Banks and the Amendments to the Law on the Banking Agency. We expect that the Federation Parliament and the State-level Parliament will adopt the relevant regulations in the coming weeks. This entire set of legislation will lead to a more modern banking sector and, most importantly, safer banks. A stronger financial sector will not only continue to build public confidence in depositing money in banks but will also support private sector activities and entrepreneurship.

Parodi said that the implementation of these measures is very important because it will bring long-term benefits to BiH. It will strengthen the economy and create conditions for new job creation.