The International Monetary Fund (IMF) will approve a loan of €150 million for Bosnia and Herzegovina after political blockade in that country had caused the failure of the negotiations on a much more ambitious €750 million financial support package, Croatia's state agency Hina reported on Thursday.
The IMF Resident Representative for Bosnia and Herzegovina, Andrew Jewell, confirmed for the Banja Luka-based daily Nezavisne Novine that Bosnia would be given a loan with an interest rate of 0.5 percent, adding that this was only part of the planned package whose purpose is to help the country overcome the economic crisis caused by the coronavirus pandemic.
They had approved its loan through the Special Drawing Rights (SDR) mechanism, established in 1969 and intended to assist member countries in crises. Over the past five decades it has issued $293 billion in loans. Jewell said that SDR securities would be issued to Bosnia by the end of the year.
The IMF had originally planned to approve a much larger €750 million loan to Bosnia, but negotiations on conditions for the loan came to a standstill early this year after authorities in the Serb-dominated Republika Srpska (RS) half of the country had rejected reforms that IMF insisted on.
Namely, RS authorities had objected to introducing a single country-level register of all privately held bank accounts, on the grounds that insight into individuals’ accounts was in the remit of sub-national entities, rather than the central government in Sarajevo.
The IMF had pushed for a single account registry in an effort to help prevent money laundering, in line with regulations which already exist in the European Union.
After negotiations with the IMF had broken down, RS authorities had to find other ways to tackle the entity’s budget deficit, so they decided to sell government bonds on the London Stock Market earlier this year. A €300 million bond was issued in April, with an interest rate of 4.75 percent.
In comparison, the IMF’s €750 million offer came with a 1.0 percent interest rate. At the time, finance experts warned that because of opting for bonds instead of agreeing to the IMF package, the Banja Luka-based entity would spend at least €75 million more over a period of five years.