IMF and Bosnia negotiate 1-billion-euro arrangement

Apr 13, 2009, 9:26 GMT

Sarajevo - An International Monetary Fund (IMF) team was due in Sarajevo Monday to start talks on a 1-billion-euro (1.31 billion dollars) standby arrangement Bosnia needs to cover its budget shortfall.

The former Yugoslav republic, consisting of two largely independent entities, faces a dramatic shortage of funds after the international crisis also cut into its state revenues.

Particularly hard-hit is the Muslim-Croat Federation of Bosnia-Herzegovina, which already raised a short-term, 71-million- euro credit from local banks to cover backlog payments from 2008.

Nearly one-fifth of the 972 million euros planned for spending in the Federation's budget were earmarked for payments that were due already last year - but revenue in the first two months of 2009 fell by 13.3 per cent in comparison to the corresponding period last year.

The Federation spends 232 million euros annually for pensions and welfare of veterans who fought in the 1992-95 war with Serbs.

The other Bosnian entity, the Serb Republic, is doing better, because it still has some 500 million euros from the privatization of its telecommunications and oil firms, to prop up the 852-million euros budget.

Bosnia had two stand-by arrangements with the IMF, worth 240 million dollars between 1998 and 2004. Today it has 3 billion dollars in foreign debts, or some 17 per cent of its gross domestic product.

Economic growth was projected to be 5.5 per cent, along with a 7.4-per cent inflation rate in 2009, but those figures would certainly be revised downwards.