IMF postpones its 550 million euro loan agreement with Bosnia and Herzegovina

According to the Bosnian news agencies, the IMF will postpone its loan agreement with Bosnia and Herzegovina. The main reason for the IMF’s decision to delay the agreement is the Fiscal Council of Bosnia and Herzegovina, which failed to sign the “Letter of Intent” that was agreed on in May.

Sarajevo – the capital of Bosnia and Herzegovina (en.wikipedia.org)

Today, the IMF representative to Bosnia and Herzegovina Francisco Parodi confirmed the delay.  Parodi explained that the elements and the content of the “Letter of Intent” were agreed upon by the IMF and Bosnia and Herzegovina in May of this year. “However till today the IMF hasn’t received a signed ‘Letter of Intent'”.

The IMF EUR 550 million worth loan agreement with Bosnia and Herzegovina was hailed by the country’s authorities as the tool for “financial stability”. On May of this year the IMF announced that it will give a loan to Bosnia and Herzegovina of over half a billion euros under a three year program, followed by a request to Bosnian authorities to cut the public debt and improve business conditions in the country.

The media in the country with one of the most complex political systems in the world, speculate that the leaders of the Party of Democratic Activity (SDA) – pro-Bosniak right-wing party are the ones who have not signed the “Letter of Intent”. Specifically, the President of the Council of Ministers of Bosnia and Herzegovina (Prime Minister), Denis Zvizdić and the Prime Minister of Federation of Bosnia and Herzegovina (Bosniak and Croat dominated entity within Bosnia) Fadil Novalić haven’t signed the “Letter of  Intent”.

So far, not one of the Bosnian media explained the reasons why the prime ministers haven’t signed the letter.

Bosnia and Herzegovina is a complex political system consisting of two entities (Federation of Bosnia and Herzegovina and Republic of Srpska) and one autonomous district. Within the Federation of Bosnia and Herzegovina there are 10 different cantons with their own executive and legislative branches of government. All those levels of governments hoped to cover some parts of their domestic debt with money from the IMF loan.

Compared to its neighbor countries, Bosnia and Herzegovina has one of the smallest external debts (USD 9 billions).