Press Release No. 18/43

IMF Executive Board Completes First Review of EFF Arrangement with Bosnia and Herzegovina and Concludes 2017 Article IV Consultation

February 9, 2018

• Disbursement of about €75 million approved with review completion.
• BiH has made progress in lowering internal and external imbalances and enhancing growth potential.

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Bosnia and Herzegovina’s (BiH) economic performance under the Extended Fund Facility (EFF). The completion of the review will make available SDR 63.4 million (€74.6 million) to BiH under the EFF, bringing the total funds available to SDR 126.8 million (€149.3 million).

The Executive Board today also concluded the 2017 Article IV consultation with BiH. A press release will be issued separately.

The Executive Board approved the 36-month, SDR 443.042 million (about €553.3 million at the time of approval) arrangement under the EFF for BiH on September 7, 2016 (see Press Release No. 16/396).

Following the Executive Board’s decision, Mr. Tao Zhang, Deputy Managing Director and Acting Chair issued the following statement:

“Bosnia and Herzegovina has continued to make progress in lowering internal and external imbalances in recent years. The authorities have also implemented economic policies and structural reforms under the Fund-supported program, including maintaining fiscal discipline, safeguarding financial stability, and improving the business environment. It is important that the authorities continue with efforts to enhance growth potential and address structural weakness, while maintaining economic and financial stability.

“There has been progress in advancing structural reforms, including harmonizing tax laws across the entities and improving corporate governance in State-Owned-Enterprise. The recent increase in excise rates on fuel products is expected to unlock external financing for significant growth-enhancing infrastructure investment. Going forward, the authorities need to continue their efforts to improve the business environment, by reforming the labor market and reducing para-fiscal fees.

“The budgets for 2018 envisage continued lowering of the wage bill in relation to GDP through a general wage freeze and hiring restraint. The authorities are encouraged to continue with public sector employment reforms, including by conducting functional reviews. Wage bill savings should be channeled to boost growth-enhancing capital spending. Addressing the issue of public sector arrears is key to mitigating potential fiscal risks, and reforms that help lower arrear accumulation should commence promptly.

“The banking sector remains broadly stable, but vulnerabilities remain and vigilance is warranted. Commendable progress has been made in modernizing the legal and regulatory environment of the financial sector by adopting new banking laws and amending the banking agency laws. Prompt passage of the new deposit insurance law will be important. Sustained efforts are needed to improve coordination, cooperation, and information exchange among various financial sector authorities to safeguard financial sector stability.”