An International Monetary Fund mission will arrive in Bosnia today to start nearly three weeks of negotiations on a stand-by deal for the Balkan country which is seen falling into recession this year.
The visit marks the latest sign of economic difficulties spreading across the Balkans, a region whose leaders last year had hoped could avoid the worldwide downturn. Most experts now expect a recession across the former Yugoslavia.
Bosnia's two autonomous regions, the Muslim-Croat federation and the Serb Republic, have asked the central cabinet to invite the lender for loan talks after budget revenues fell in the first quarter, as well as output and exports.
The mission begins meetings in Banja Luka, the main city of the Serb Republic, and will move on, on April 20th, to Sarajevo, for talks with the Muslim-Croat federation government officials and central cabinet ministers, IMF staff in Sarajevo said.
Bosnia's central bank governor Kemal Kozaric has said that Bosnia could draw up to one billion euros, which would amount to about 8 per cent of 2008 GDP. Bosnian officials have not said how much they would request in an IMF deal.
Under the lender's rules, Bosnia can triple its quota of about €200 million at the IMF, and ask for more under special circumstances.
Among other former Yugoslav countries, Serbia has already won a €3 billion IMF loan, and Montenegro and Macedonia and considering an arrangement. All suffer from falling industrial output, lower remittances from abroad and lower government revenues.
The IMF is forecasting recession in Bosnia this year.
Within Bosnia, the Muslim-Croat half of the country is in a difficult situation because of high social benefits for veterans and those disabled in the 1992-95 war. It already revised its 2009 budget to fill a 2008 gap and plans a new budget rebalance probably in May.
Finance minister Vjekoslav Bevanda has said the federation needs the IMF money to cover its budget deficit, and that loans secured at commercial banks will be replaced with IMF loans immediately after Bosnia wins a deal.
The Serb Republic has a more favourable budget situation from privatisation receipts from previous years. Its finance minister Aleksandar Dzombic has said the Serb Republic does not urgently need IMF funds but would use them as a reserve in the case of a bigger crisis.
Mr Dzombic said the Serb Republic has already made some moves that the IMF will seek from the Bosnian authorities, such as a wage freeze and cuts of public expenditures to below 40 percent of the gross domestic product.
Reuters