## IMF Survey: Bosnia and Herzegovina Gets €405 Million Loan from the IMF

_IMF News, October 5, 2012_

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**Canonical URL:** [IMF Survey: Bosnia and Herzegovina Gets €405 Million Loan from the IMF](https://www.imf.org/en/news/articles/2015/09/28/04/53/soint100512a)

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## Bibliographic details
- Authors: Arrangements EMERGING EUROPE
- Published: October 5, 2012

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### Program approval and objectives
- IMF’s Executive Board approved on September 26 a 24-month €405 million Stand-By Arrangement for Bosnia and Herzegovina.
- Program aims:
  - Counter the effects of the euro area crisis on Bosnia and Herzegovina.
  - Address structural challenges facing the country.
- Four-pronged approach:
  - Improve national policy coordination across multiple government levels.
  - Maintain fiscal discipline while advancing structural fiscal reforms, including reducing current expenditure, allowing more space for capital spending, and making social spending more targeted.
  - Safeguard financial stability within the context of the currency board (introduced in 1997) by improving crisis preparedness, banking supervision, and resolution frameworks.
  - Intensify reforms to improve the business environment to support growth, investment, and job creation.

### Economic outlook and risks
- Growth and inflation projections:
  - Expect economic growth to start recovering in 2013 after stagnation in 2012.
  - Project modest growth of about 1 percent in the next year, with inflation remaining low.
- Domestic demand constraints:
  - High unemployment, fiscal restraint, and slow credit growth expected to keep domestic demand subdued.
- External risks:
  - Majority of risks tilted to the downside, primarily from a possible intensification of the euro area crisis.
  - Channels of transmission include exports, remittances, capital inflows, and foreign banks’ reliance on parent-bank funding and exposure to loss of confidence in home countries.

### IMF engagement and recent program history
- Membership and early assistance:
  - Bosnia and Herzegovina became a member on December 20, 1995; on that same day the Fund approved financial support under a new policy on emergency assistance for post-conflict countries.
- Recent programs:
  - Last IMF-supported program was a three-year Stand-By Arrangement approved in July 2009; last review completed in October 2010.
  - Political delays prevented completion of further reviews until after a new Council of Ministers was confirmed by Parliament in March of the stated year.
  - Staff-level agreement reached in July; Executive Board approved the new two-year Stand-By Arrangement on September 26.
- Additional support:
  - Beyond financial support, the country has benefited from extensive technical assistance and training provided by the IMF.

### Medium-term macroeconomic challenges and policy recommendations
- Fiscal policy and public spending:
  - The size of government remains very large; focus should be on reducing current public expenditures.
  - Increase capital spending (including on highways) while improving the targeting of social spending.
- Financial sector resilience:
  - Strengthen contingency planning and crisis preparedness.
  - Improve coordination between the central bank and the banking agencies and enhance cooperation with home supervisors.
- Structural reforms:
  - Address structural impediments that hamper economic performance to achieve more balanced growth and job creation.
- Institutional coordination:
  - Improve national policy coordination given the country’s complex governance structure (two Entities and ten cantons with most economic power, and a limited-mandate State government).

### Key statistics and dates (as reported)
- Stand-By Arrangement size: €405 million
- Duration of arrangement: 24-month
- Expected growth (next year): about 1 percent
- Currency board introduced: 1997
- War period causing near-80 percent GDP decline: 1992–95
- IMF membership date: December 20, 1995
- Previous Stand-By Arrangement approval: July 2009
- Last review under previous program: October 2010
- New program staff-level agreement: July (year as reported)
- New program Executive Board approval: September 26
- IMF Survey online publication date: October 5, 2012

*IMF Survey: Bosnia and Herzegovina Gets €405 Million Loan from the IMF, October 5, 2012*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Survey Interview](https://www.imf.org/en/news/search)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Press release](https://www.imf.org/external/np/sec/pr/2012/pr12366.htm)
- [Read the report](https://www.imf.org/external/pubs/cat/longres.aspx?sk=40038.0)
- [Bosnia and the IMF](https://www.imf.org/external/country/BIH/index.htm)
- [The IMF and Europe](https://www.imf.org/external/region/eur/index.htm)
- [Blog: Crisis, emerging Europe](http://blog-imfdirect.imf.org/2012/07/27/convergence-crisis-and-capacity-building-in-emerging-europe/)
- [Blog: Banks in Eastern Europe](http://blog-imfdirect.imf.org/2012/06/13/lost-found-in-eastern-europe-replacing-funding-by-western-europes-banks/)
- [Europe needs action on growth](https://www.imf.org/external/pubs/ft/survey/so/2012/POL061812A.htm)
- [IMF Stand-By Arrangements](https://www.imf.org/external/np/exr/facts/sba.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/soint100512a_