Press Release: Bosnia and Herzegovina Becomes a Member of the IMF; Receives IMF Credit from Emergency Window

IMF News, December 20, 1995

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Canonical URL: Press Release: Bosnia and Herzegovina Becomes a Member of the IMF; Receives IMF Credit from Emergency Window

Date: December 20, 1995
The Executive Board of the International Monetary Fund determined that Bosnia and Herzegovina has fulfilled the necessary conditions to succeed to the membership of the former Socialist Federal Republic of Yugoslavia (SFRY) in the IMF.
With the succession of Bosnia and Herzegovina, IMF membership totals 181 countries.

Approved drawing under the IMF's policy on involvement in post-conflict countries: SDR 30.3 million (about $45 million).
Bosnia and Herzegovina's quota in the IMF: SDR 121.2 million (about $180.1 million).

Outstanding arrears arising from Bosnia and Herzegovina's share of liabilities and assets of the former SFRY in the IMF: SDR 25.1 million (about $37 million).
Clearance of arrears was effected through a short-term bridge loan provided by the Netherlands Central Bank.
The Netherlands Central Bank bridge loan has been repaid from the credit provided by the IMF under the policy on involvement in post-conflict countries.

Major constraints facing the government:
- Rebuilding the country after the devastations of war while maintaining control over financial policies.
- Physical bottlenecks.
- Weak and fragmented administration.
- Severe foreign exchange shortages.
- Deep-rooted structural problems in the enterprise and banking sectors that make the economy highly inflation-prone.
Two key decisions providing assurance on maintaining control over financial policies:
- The new central bank, to be established under the constitution, will operate for at least six years as a de facto currency board, issuing currency only when there is full foreign exchange backing.
- The central government and public sector entities have decided to refrain from domestic bank financing of fiscal expenditures.
It is too early to develop a quantified framework for macroeconomic policies.

Authorities intend to initiate discussions on a more comprehensive economic program that could be supported by the IMF under:
- the upper credit tranches, or
- the enhanced structural adjustment facility (ESAF),

once effective procedures for policy development and implementation are in place and an adequate administrative infrastructure has been established.

The international community's role:
- Large-scale financial and technical support is clearly needed for reconstruction.
- Financial support must be on highly concessional terms considering the limited debt-servicing capacity of the country.
- Financial assistance must be received urgently to overcome acute bottlenecks in key sectors.
To unlock broad-based foreign assistance, the authorities will need to seek an early normalization of relations with external creditors, starting with the problem of arrears to multilateral institutions, other than the IMF.

The ESAF is a concessional IMF lending facility for assisting low-income members undertaking economic reform programs.
ESAF loan terms specified:
- interest rate: 0.5 percent
- repayable over 10 years
- grace period: 5 1/2 years

Press Release No. 95/70, IMF Press Center, December 20, 1995