SARAJEVO (Bosnia and Herzegovina), November 21 (SeeNews) – The International Monetary Fund (IMF) said on Tuesday it is not releasing funds to Bosnia and Herzegovina until the country's parliament increases excise tax on fuels.
In September last year, the IMF approved a three-year 553.3 million euro loan ($648.2 million) to Bosnia to support the country's economic reform agenda. However, the IMF delayed the release of the second loan tranche in May, after the Bosnian authorities failed to meet the agreed reform targets.
"Continued delay has slowed the economic recovery and affects prospects for faster growth and job creation in future," the head of IMF mission to Bosnia, Nadeem Ilahi, said in a statement following a two-week visit to the country.
He added that although Bosnia has made some progress on structural reforms, the implementation of key measures, particularly the adoption of a new excise tax law, has been much slower than expected.
"This is necessary to unlock the largest package of external financing available in recent times for critical public infrastructure investments," Ilahi said.
The IMF mission noted that the economy of Bosnia and Herzegovina is seeing a cyclical recovery, though one that is weaker than that in the rest of Eastern Europe.
"Exports and remittances have been increasing and inflation is expected to pick up in 2017. While macroeconomic stability has been maintained, the program’s main aim of boosting economic growth and creating jobs remains largely unaddressed," Ilahi said.
The mission also said that Bosnia's entities, the Serb Republic and the Federation, must adopt their 2018 budgets, while state-level authorities are encouraged to complete the same process for the country's institutions in a timely manner.
Additionally, the country must step up the adoption of a new deposit insurance law in order to modernize its banking sector, while the Federation needs to take steps to initiate the agreed due diligence of the telecommunication companies on its territory, BH Telecom and HT Mostar.
Bosnia and Herzegovina is made up of two entities, the Federation and the Serb Republic.
Since the IMF put its funding on hold, the two entities have been struggling to stay liquid. In October, the Serb Republic concluded a loan deal with Serbia's Komercijalna banka, while the Federation has held several T-bill auctions in a bid to plug budget holes.
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