Bosnia Having Trouble Obtaining Much Needed IMF Financing

Bosnia is struggling with growing budget deficit problems and is in desperate need of a new loan from the International Monetary Fund (IMF). Therefore, Bosnia’s government is trying to meet the last few requirements necessary to access a new IMF program that could get the nation about 500 million euros. If it fails, Bosnia faces a serious liquidity crisis.

Bosnia is struggling with growing budget deficit problems and is in desperate need of a new loan from the International Monetary Fund (IMF). Therefore, Bosnia’s government is trying to meet the last few requirements necessary to access a new IMF program that could get the nation about 500 million euros. If it fails, Bosnia faces a serious liquidity crisis.

Some portions of Bosnia could run out of money by the end of the month. That would leave salaries, pensions, social welfare programs, and many other costs left unpaid. If the Baltic state can satisfy the IMF program’s requirements, it could finalize its application to the program by the end of May.

On Tuesday, Bosnian officials expressed an optimistic view of the nation’s chances to satisfy the program requirements in time to qualify and avoid a liquidity crisis. Internal struggles, however, still remain, as representatives of different regions and ethnic backgrounds struggle to find common ground on the measures.

One of the IMF’s primary demands of Bosnia is tougher banking regulation. Bosnian Prime Minister Denis Zvizdić said the IMF even suggested that it might require the creation of a state regulatory authority to oversee these banking requirements. “There must be some kind of regulatory agency that will regularly supervise the activities of active banks,” he said on Tuesday.

While enacting such a measure in such limited time could prove difficult, given the political tensions present in Bosnia, Zvizdić argued strongly for the banking authority. He suggested that the authority could help prevent bank failures, improve investor confidence, and help ward off allegations of impropriety.

In recent years, three major Bosnian banks collapsed, ruined by poor management and possible corruption. As Zvizdić said in lobbying for the banking authority, “We cannot allow something like this to happen again.”

Bosnia already has two regulatory agencies for banking; however, each is limited in its authority. The Bosnian people have long been wary of centralized government authority, and this has created the tension that is stalling the nation’s compliance with the IMF’s suggestions.

In fact, some factions within the Bosnian government believe further IMF funding is the wrong solution. They believe the nation needs to suffer through the short-term pain of its financial troubles in favor of stronger long-term solutions, including increasing economic production and domestic investment. This view appears to be favored by a very vocal minority.

In addition to the nation’s efforts to seek assistance from the IMF, it also intends to issue a number of bonds (worth approximately 20.4 million euros) in early May.