IMF says Bosnia's failure to disburse IMF emergency aid is unprecedented

SARAJEVO (Reuters) - Five weeks after the International Monetary Fund gave Bosnia $370.46 million in emergency aid to help combat the coronavirus crisis, the funds have still not been disbursed due to a disagreement between its rival ethnic leaders, officials said.

Even though the lender had doubled the original amount, the leaders have not reached a consensus on how to split the funds, which have remained blocked at the central bank ever since.

The aid was approved and handed over only after a political deal was reached under which the Federation would receive 62% and the Serb Republic 38% of the funds, while each region would allocate 0.5% of its share to Bosnia’s neutral Brcko District.

In the Letter of Intent signed with the IMF, the leaders of the Bosniak-Croat Federation also agreed to allocate 50% of the funds to its 10 cantons, the pledge that was later reflected in the region’s revised budget for 2020.

But in reality, Croat and Bosniak ministers in the national government have persistently argued over the legal procedure needed for the disbursal of the funds.

“I would have never imagined that it would have dragged so long,” said Andrew Jewell, the IMF resident representative in Bosnia. “To my knowledge, this situation is unprecedented, for a country to request emergency assistance and not use it.”

Reuters tried to contact Bosnia’s prime minister for comment but he was not immediately available to comment.

Bosnia comprises two autonomous regions, the Bosniak-Croat Federation and the Serb Republic, tied via a weak central government.

Jewell said the IMF transferred the funds under its Rapid Financing Instrument on April 22, following an agreement among the Bosnian Serb, Croat and Bosniak (Bosnian Muslim) leaders on how to distribute them.

The European Union delegation and U.S. Embassy in Bosnia, both of which have mediated in removing the impasse, have called on the national government to issue a decision to allocate the funds in accordance with the Letter of Intent.

“Bosnia-Herzegovina politicians should immediately unblock the IMF funds so they can be used for the good of the citizens,” they said in a joint statement on Thursday.

Finance Minister Vjekoslav Bevanda, a Croat, said on Thursday that such a decision was not necessary, while the central bank governor, Senad Softic, a Bosniak, said the bank would not disburse the funds to the regions without the decision that is reflecting the Letter of Intent with the IMF.

Jewell said that holding of the emergency assistance may have an impact of the future IMF loans.

“In this environment when they are sitting on 333 million euros it’s highly unlikely that we would start negotiations on a new programme,” he told Reuters.

($1 = 0.8989 euros)