IMF Executive Board approves $ 361 million in emergency aid to Bosnia and Herzegovina to tackle COVID-19 pandemic

IMF Executive Board approves $ 361 million in emergency aid to Bosnia and Herzegovina to tackle COVID-19 pandemic

April 20, 2020

• The impact of the pandemic is expected to be substantial and generate a rapid deterioration in external accounts;
• The economy is expected to decline 5% in 2020 and recover to 3.5% in 2021
• The rapid financing instrument will help support increased priority spending on health and social assistance, while preserving debt sustainability.

Washington, DC – April 20, 2020. The
The Executive Board of the International Monetary Fund (IMF) today approved SDR 265.2 million (approximately US $ 361 million or € 333 million, or 100% of its SDR quota) for the emergency aid to Bosnia and Herzegovina (BiH) within the framework of

Quick financing instrument

(RFI). It will help the country meet an urgent balance of payments need due to the global outbreak of the COVID-19 pandemic.

The RFI provides rapid, low-access financial assistance to member countries facing an urgent balance of payments need, without the need for a full-fledged economic program or reviews. It can provide support to meet a wide range of urgent needs, including those resulting from commodity price shocks, natural disasters, conflict and post-conflict situations. Financial assistance under the RFI is provided in the form of outright purchases.

The short-term economic impact in Bosnia and Herzegovina is expected to be substantial, generating a rapid deterioration in external accounts and urgent balance of payments needs. Economic growth is expected to decline by 5% in 2020 and return to around 3.5% in 2021.

RFI will support authorities’ efforts to increase spending to contain the human costs of COVID-19 and mitigate its economic impact. The governments of Bosnia and Herzegovina are planning a significant fiscal expansion to increase health and social spending. This IMF financing will play a key role in catalyzing emergency aid from the international community, in particular the EU.

The IMF will continue to monitor the situation in Bosnia and Herzegovina closely and stand ready to provide policy advice.

After the Board discussion, Mr. Tao Zhang, Deputy General Manager and Acting Chairman, made the following statement:

“The economy of Bosnia and Herzegovina is suffering from the COVID-19 pandemic, which has created an urgent balance of payments need.

“In view of the significant and rapid deterioration of the external accounts, the rapid financing instrument will help support the increase in priority spending on health and social assistance, while preserving debt sustainability.

“To cope properly with the medical emergency and the sharp contraction in production, fiscal expansion is necessary. In the short term, to mitigate the health and economic impact of the pandemic, the priority is to increase health-related spending, expand unemployment and social benefits, and support businesses to maintain employment. The authorities are committed to returning to a fiscal stance that stabilizes debt once the situation returns to normal.

“Preserving the currency board arrangement and strengthening the resilience of the banking system play a crucial role in restoring external and internal balances. High-frequency monitoring of banks, including their liquidity positions and the quality of their assets, is crucial at this stage.

“Emergency assistance from donors and other IFIs is needed to close the remaining balance of payments gap. ”

More information

IMF Lending Tracker (request for emergency financing approved by the IMF Executive Board)

https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker

IMF Executive Board Calendar

https://www.imf.org/external/NP/SEC/bc/eng/index.aspx