There are signs that the assistance given by the International Monetary Fund (IMF) to Bosnia and Herzegovina had helped stabilise the economy in a difficult external environment, an IMF mission said on May 18 2010 at the end of a 13-day mission to the Western Balkans country.
 
The IMF mission, led by Costas Christou, visited Bosnia and Herzegovina to initiate discussions on a second review of the country’s stand-by arrangement with the fund.
 
Bosnia and Herzegovina has an external debt of about 30 per cent of GDP. In 2009, the IMF pledged 1.2 billion euro to help ease the impact of the economic crisis on the country, which of late has been hit by the slide in the euro, to which local currency the marka is pegged.
 
An IMF statement quoted Christou as saying that there were signs that the arrangement had helped stabilise Bosnia and Herzegovina’s economy in a difficult external environment.
 
"Macro-financial vulnerabilities have been reduced, household deposits have fully recovered from their low point in late 2008, the central bank’s foreign exchange reserves have remained stable, and foreign-owned banks have broadly maintained their exposure to BiH," Christou said.
 
Positive developments so far this year include growth in industrial production in both BiH’s entities, strong pickup in exports, and gains in indirect tax revenue collection, he said.
 
"Accelerated implementation of policies is now needed to preserve these early gains. All the quantitative targets for end-March 2010, for which information is available, were met but effective implementation of the Federation’s structural benchmarks has been slow."
 
He said that the authorities were now considering measures to correct these slippages, including by expediting eligibility audits; finalising the privileged pension reform; and taking steps to ensure that the budget allocation for the wage bill in 2010 will not be exceeded.
 
"Although there is general agreement on the need to improve the government’s financial position, the authorities need more time to reach consensus about how to achieve this objective. In this context, it would be helpful if the State and the Entity authorities were to agree on a common global fiscal framework for 2011-13, for which work has already begun," Christou said.
 
"With the initial signs of the economic recovery under way, it is important that the BiH population’s hopes for better growth and employment prospects are not undermined by policy uncertainty ahead of the October elections.
 
"Against this background, strong leadership by all authorities will be required to mobilise support for the difficult decisions that may still need to be taken. Perseverance with reforms of rights-based benefits and continued efforts to strengthen the fiscal position will remain critical for the better targeting of social benefits, and for the financial integrity of the public pension systems," he said.
 
Christou said that discussions with the authorities would continue, as soon as the authorities come to agreement on measures necessary to advance the programme objectives under the SBA.
 
"The fourth tranche of support, SDR 33.82 million (about 40 million euro), is contingent upon satisfactory completion of this review. This would bring the overall support from the IMF, including the SDR allocation, provided to BiH to about 565 million euro," Christou said.