* IMF to hold funds until policies implemented
* Wary about reform progress in an election year
By Daria Sito-Sucic
SARAJEVO, Feb 28 (Reuters) - Bosnia, which has suffered its worst social unrest this month since the 1992-95 war, risks losing badly needed funds from the IMF because local governments have failed to implement agreed economic policies, a senior IMF official said on Friday.
Ron van Rooden, who was heading a two-week visiting mission to Bosnia, told Reuters the International Monetary Fund will not be able to conclude its sixth review for the stand-by loan to Bosnia until the governments have met the terms of the deal.
Bosnia's two rival regions, the Serb Republic and the Federation dominated by Croats and Muslim Bosniaks, have failed to put in place policies to improve tax collection, contain government spending and improve the business environment.
Political bickering has kept two anti-corruption laws demanded by the lender - a new procurement law and anti-money-laundering legislation - stuck in the national parliament.
The IMF Steering Board was to meet at the end of March to approve a disbursement of 48 million euros ($66.30 million) under the existing 385 million-euro stand-by arrangement for the Balkan country.
The IMF agreed last month to extend Bosnia's programme for nine months and add about 154 million euros to the loan to help with financing needs expected at the end of the year.
Van Rooden said the two regions needed to start sharing information about taxpayers to secure better tax collection and harmonise the excise fees of tobacco products.
They also must provide credible guarantees their spending will be contained within the agreed budget framework after they missed the fiscal targets for the end of December, he said.
"Going forward will be increasingly difficult, and that is why it's all the more important to get these things done," Van Rooden said in an interview, cautioning about risks of weakening policies in the election year.
Bosnia is holding parliamentary and presidential elections in mid-October. In recent weeks, it has been hit by daily protests against unemployment, corruption and political inertia.
"What the protests show is that economic situation is still difficult and underscore even more the need to move ahead with reforms to improve the business environment and reforms of labour laws in the two entities," Van Rooden said.
He said the lender raised its forecast for 2013 economic growth in Bosnia to a little over 1 percent from less than 1 percent. IMF sees growth in 2014 at 2 percent of GDP.
($1 = 0.7240 euros) (Reporting by Daria Sito-Sucic; Editing by Larry King)
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