IMF Reaches Staff-Level Agreement with Bosnia and Herzegovina on the Second Review under the Extended Fund Facility Supported Program

Stocks and Financial Services Press Releases Tuesday May 22, 2018 09:30
IMF--22 May--International Monetary Fund

An International Monetary Fund (IMF) mission, led by Nadeem Ilahi, visited Sarajevo and Banja Luka during May 7-21, 2018, to discuss recent economic developments and policies for the second review of the Bosnia and Herzegovina economic program, supported under the IMF's Extended Fund Facility (EFF). At the conclusion of the mission, Mr. Ilahi made the following statement:

"Bosnia and Herzegovina's economic program remains on track. IMF staff and the BiH authorities have reached agreement, subject to approval by the IMF Executive Board on the policies needed to complete the second review under the EFF. Consideration by the Board would follow the implementation of one prior action.

"The recovery has strengthened, largely led by strong private consumption and exports and the unemployment rate has also declined. Preliminary data on tax revenues, remittances, and bank lending suggest that this positive trend will continue into 2018.

"Program performance has been satisfactory and all the program's fiscal targets have been met. The combined budget surplus reached two percent of GDP in 2017, mainly as the authorities have restrained overall spending. The mission welcomes the recent adoption of budget rebalances in the Federation and Republika Srpska; these will help maintain a prudent fiscal stance and provide additional financing for growth-enhancing capital projects.

"Progress on implementing reforms has been slower than expected. We urge the BiH parliament to adopt the new Law on Deposit Insurance. Entity level banking and banking agency laws have already been passed, and delay in passage of the new deposit insurance law affects the modernization of the country's banking sector legislation.

"Further efforts are needed to create private sector jobs. Reduction in employment taxes will help increase formal sector employment. Submission of the draft law on personal income tax/social security contributions to the Federation parliament that is in line with IMF staff recommendations is a prior action for this review and will help in this regard.

"The mission is heartened by the actions taken by the authorities to strengthen financial stability.
"We encourage the authorities to redouble efforts to implement structural reforms in the period ahead. IMF staff stands ready to assist them.
"The Executive Board of the IMF is expected to discuss the second review in Summer 2018. Approval of the review would enable the disbursement of SDR 31.6217 million (about euro 38 million)."

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