Front Matter Page
© 2009 International Monetary Fund
July 2009
IMF Country Report No. 09/226
Bosnia and Herzegovina: Request for Stand-By Arrangement—Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Bosnia and Herzegovina
In the context of the request for a Stand-By Arrangement for Bosnia and Herzegovina, the following documents have been released and are included in this package:
The staff report for Request for Stand-By Arrangement, prepared by a staff team of the IMF, following discussions that ended on May 5, 2009, with the officials of Bosnia and Herzegovina on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 17, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff statement of July 8, 2009, updating information on recent developments.
A Press Release summarizing the views of the Executive Board as expressed during its July 8, 2009, discussion of the staff report that completed the request.
A statement by the Executive Director for Bosnia and Herzegovina.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Bosnia and Herzegovina*
Technical Memorandum of Understanding*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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Washington, D.C.
Front Matter Page
INTERNATIONAL MONETARY FUND
BOSNIA AND HERZEGOVINA
Request for Stand-By Arrangement
Prepared by the European Department (In consultation with other departments)
Approved by Poul M. Thomsen and Dominique Desruelle
June 17, 2009
Stand-By Arrangement (SBA). In the attached letter, the authorities of Bosnia and Herzegovina request a 36-month, SDR 1,014.6 million (about US$1.6 billion, 600 percent of quota) SBA. An initial purchase of SDR 182.6 million (108 percent of quota) would be available upon approval of the arrangement, and the remainder phased thereafter, subject to quarterly reviews. In the letter, the authorities outline the economic program for which they seek Fund financial support and describe its economic policy objectives. The program’s key objectives are to: (i) safeguard the currency board; (ii) consolidate public finances and bring them on a sustainable medium-term path; (iii) maintain adequate liquidity and capitalization of banks; and (iv) secure enough external financing and improve confidence. To attain these objectives, the authorities will: reduce recurrent government expenditure; reform the system of nontargeted social benefits, public administration, and the budget process, while protecting public investment and the poor; and strengthen the financial system and enhance crisis preparedness.
Discussions. During April 14–May 5, the staff team met with: (i) at the State level: Member of the Presidency Silajdžić, the Chair of the Council of Ministers Ŝpirić, the Minister of Finance and Treasury Vrankić, and Central Bank Governor Kozarić; (ii) in the Federation of Bosnia and Herzegovina: Prime Minister Branković, Minister of Finance Bevanda, and the Prime Ministers and Finance Ministers of the ten Cantons; and (iii) in the Republika Srpska: Prime Minister Dodik and Minister of Finance Dzombić. The Fund staff also met with High Representative Inzko, ambassadors, opposition politicians, and representatives of the private sector.
Staff. The staff team comprised Mr. Christou (head); Mr. Cuc and Ms. Kinoshita (EUR); Ms. Eble and Ms. Karpowicz (FAD); and Ms. Khachatryan (SPR). Mr. Tomić, (OED) attended all policy meetings. The mission coordinated closely with World Bank staff on structural issues.
Contents
I. Background and Recent Economic Challenges
II. The Program
A. Overall Program Objectives and Strategy
B. The Currency Board
C. Macroeconomic Framework
D. Fiscal Policy
E. Financial Sector Policies
F. Other
III. Program Modalities
A. Access
B. Capacity to Repay
C. Program Monitoring, Conditionality, and Safeguards Assessment
IV. Staff Appraisal
Figures
1. Indicators of Economic Activity, 2003–09
2. Inflation Developments, 2005–09
3. Private Sector Credit Growth
4. Financial Sector Indicators, 2004–08
5. Central Bank’s Foreign Assets and Commercial Banks Reserves
6. External Trade, 2004–09
7. Wage Developments, January 2005–March 2009
Tables
1. Selected Economic Indicators, 2005–10
2. Balance of Payments, 2006–14
3. Selected Vulnerability Indicators, 2004–08
4. General Government, 2006–14
5. Elements of General Government, 2008–14
6. Monetary Survey, 2006–10
7. Monetary Authorities’ Balance Sheet, 2006–10
8. Survey of Domestic Money Banks, 2006–10
9. Baseline Medium-Term Outlook, 2006–14
10. Gross Financing Requirements, 2007–14
11. Indicators of Capacity to Repay the Fund, 2008–14
12. Financial Soundness Indicators, 2004–08
13. Prior Actions and Structural Benchmarks, June 2009–June 2010
14. Proposed Schedule of Purchases Under the Stand-By Arrangement, 2009–12
Boxes
1. Political Background
2. External Competitiveness
3. The European Bank Coordination Initiative
4. Stand-By Arrangement
Appendices
I. Bosnia and Herzegovina: Debt Sustainability Analysis
Attachments
I. Bosnia and Herzegovina: Letter of Intent
II. Technical Memorandum of Understanding
Front Matter Page
Press Release No.09/258
FOR IMMEDIATE RELEASE
July 8, 2009
International Monetary Fund
Washington, D.C. 20431 USA
IMF Executive Board Approves US$1.57 Billion Stand-By Arrangement for Bosnia and Herzegovina
