December 20, 2002
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The Executive Board of the International Monetary Fund (IMF) today completed the first review of Bosnia and Herzegovina's economic performance under the Stand-By Arrangement for the period August 2002-November 2003. The decision enables Bosnia and Herzegovina to draw SDR 12 million (about US$16 million) from the IMF immediately.
The Stand-By Arrangement, which was approved on August 2, 2002, totals SDR 67.6 million (about US$91 million). So far, Bosnia and Herzegovina has drawn SDR 19.6 million (about US$26 million).
Following the Executive Board discussion, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chair, said:
"Bosnia and Herzegovina has made significant economic progress during the current Stand-By Arrangement. Overall program implementation remains fundamentally on track, as most macroeconomic performance criteria and structural benchmarks have been observed to date. There was a case of misreporting of Entity transfers to the State that required, and obtained, a waiver from the Fund's Executive Board. It will be critical that such incidents not be repeated.
"The welcome acceleration in the pace of fiscal adjustment in 2002 reflected prudent expenditure management alongside key reforms to tax administration. Interim budgets for 2003 incorporating further fiscal discipline have been approved pending the formation of the new administrations. Any revisions to these budgets by the new administrations should avoid increasing the consolidated deficit and spending targets.
"The currency board arrangement continues to deliver a strong and stable currency and low inflation and enjoys the confidence of markets, as reflected in the high level of international reserves. The banking system has been strengthened through privatization and the increasing application of international standards of banking regulations.
"In the context of prospective declines in reconstruction aid inflows and high unemployment, actions to increase exports will be essential. Fiscal prudence and efforts to accelerate privatization, improve the business environment, and strengthen bankruptcy procedures will form key elements of an appropriate strategy to achieve this objective. The poverty reduction strategy paper now under preparation should aim to tackle poverty on the basis of strong macroeconomic policies, and efforts are encouraged to secure as wide an ownership base for this as possible," Mr. Sugisaki said.
