The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Bosnia and Herzegovina’s (BiH’s) economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The completion of the review enables the disbursement of an amount equivalent to SDR 42.275 million (about €47.5 million), which will bring total disbursements under the arrangement to SDR 211.375 million (about €237.3 million).

Despite a challenging environment, steady progress has been made in meeting program objectives. All end-June performance criteria (PCs) were met and steady progress was also made in observing structural benchmarks. However, as the fourth review was delayed to allow for a discussion of the policies that would allow meeting the end-2013 fiscal targets, in completing the review, the Executive Board also approved requests for the waivers of applicability of the now controlling end-September PCs on the budget balances and accumulation of domestic arrears for the Institutions of BiH and the entity central governments, for which data are not yet available. The Executive Board also approved a modification of the end-December 2013 PCs on the budget balances to allow a modest reallocation of fiscal space between the Institutions of BiH and the entities.

The SBA with BiH was approved on September 26, 2012 (see Press Release No. 12/366) in an amount equivalent to SDR 338.2 million (about €379.6 million).

Following the Executive Board’s discussion, Ms. Minouche Shafik, Deputy Managing Director and Acting Chair, stated:

“The authorities of BiH have continued to make commendable progress under the SBA. Economic activity is picking up and fiscal consolidation remains on track, reflecting the authorities’ prudent policies and an improved external environment.

“The overall budget deficit target for 2013 remains achievable despite revenue shortfalls and recent spending initiatives. However, increased efforts are necessary to strengthen tax collection and contain spending. The 2014 government budgets should aim to protect the gains made so far in fiscal consolidation and place public debt firmly on a downward path. This will continue to require strict control over current spending and broader fiscal reforms to improve revenue collection and administration.

“The banking system remains stable and well capitalized. Continued vigilance is still needed nevertheless in monitoring banks’ health. The authorities have taken steps to strengthen banking supervision, improve contingency planning and crisis preparedness, and enhance the resolution framework for non-performing loans.

“It is critical to make BiH a more attractive place to invest and create jobs. The authorities are working to improve competitiveness and the business environment, including by streamlining business registration, and labor market legislation under preparation should also aim at contributing to job creation. Progress in these areas will be key to achieving a lasting reduction in unemployment. Further action is also needed to speed up the process for closer integration with the European Union to improve BiH’s prospects for medium-term growth.” .