Bosnia government adopts budget to open IMF door

Reuters

4/19/2012

Bosnia`s central government adopted a much-delayed budget for 2012 on Wednesday, setting out wage and 
spending cuts as the Balkan country seeks talks next month with the International Monetary Fund on a 
new loan deal.

Political bickering between rival Serb, Croat and Muslim leaders had delayed adoption of the budget 
and cost the country a B2 to B3 downgrade this month from Moody`s ratings agency, in junk territory.

Prime Minister Vjekoslav Bevanda told reporters that his cabinet had adopted a budget of 950 million Bosnian 
marka ($638 million) for state institutions. The total including foreign debt servicing will amount to 
nearly 1.4 billion marka.

Finance Minister Nikola Spiric said the draft, which is likely to be debated by parliament next week, 
reflected new legislation cutting the wages of all public sector workers by 4.5 percent and trimming 
spending on business trips and perks.

"This budget is restrictive, but sufficient to finance all institutions important for the Euro-Atlantic 
path," Spiric said, referring to Bosnia`s aim of becoming closer to the west.

"I think we have drafted a good budget framework which will make us a credible partner in cooperation 
with international financial institutions."

Emerging from 16 months of political paralysis after an election in October 2010, Bosnia`s central government 
says it hopes to apply for membership of the European Union within months, but needs to finance the institutions 
tasked with pursuing the necessary reforms.

Bosnia has a highly decentralized system of government, with the country split after its 1992-95 war 
into two autonomous regions that frequently lock horns over funding.

The political impasse, with ethnic parties vying over how to form the central government, cost Bosnia 
access to much-needed foreign funding. The IMF in 2010 froze a 1.1 billion euro ($1.45 billion) standby 
arrangement over delayed reforms.

With the two regions now forecast to run significant budget deficits this year, the central government 
says it plans to return to the IMF to negotiate a new loan deal to plug the budget holes. Talks are expected 
to start in mid-May.

Spiric said the draft budget also included outstanding payments of 20 million marka for war veterans 
who were forced into early retirement and promised pensions ahead of the 2010 election but were never 
paid.

Hundreds of the veterans, from all sides to the conflict, have been protesting in front of the government 
building for almost a month.