Press Release No. 10/111

Press Release: IMF Completes First Review under Stand-By Arrangement with Bosnia and Herzegovina, Approves € 138.4 million Disbursement

March 24, 2010

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Bosnia and Herzegovina's economic performance under a program supported by a 36-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 121.75 million (about € 138.4 million or US$ 184.6 million), bringing total disbursements under the program to an amount equivalent to SDR 304.38 million (about € 345.9 million or US$ 461.4 million).

The SBA was approved on July 8, 2009 (see Press Release No.09/258). Following the Executive Board's discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

“The authorities are to be commended for their satisfactory policy implementation under the Stand-by Arrangement amid a difficult economic and political environment. Strong efforts will continue to be needed to ensure fiscal and external sustainability, and to provide the basis for robust, sustainable growth. The authorities are committed to carefully monitor program implementation and adjust policies as necessary.

“The program’s fiscal deficit objective for 2010 has been adjusted to strike a balance between accommodating the still weak economic situation and preserving the medium-term consolidation objectives. The envisaged measures aim to secure a permanent reduction in recurrent government spending, thus providing more space for much-needed capital expenditure. The reform of social benefits, including through better targeting, is crucial for safeguarding social protection and ensuring that these benefits reach the most vulnerable groups of the population. The authorities are also committed to reforming the pension and wage systems, and improving the budget process and public finance management.

“The authorities are committed to continue to carefully monitor Bosnia and Herzegovina’s competitiveness. Structural impediments to growth will be addressed through reforms aimed at enhancing productivity and fostering private sector development.

“The financial sector has coped well with the crisis. The commitment of foreign parent banks to maintain their exposure vis-à-vis Bosnia and Herzegovina and to keep their subsidiaries well capitalized has had a stabilizing effect. The recent enhancement of the monitoring of financial stability and improvements in crisis preparedness and management should increase the effectiveness of the authorities’ response to future challenges. Continued vigilance and strengthened cooperation between the central bank and banking agencies will be important.”