IMF to unfreeze Bosnia loan deal after key laws passed -official

by Reuters
Friday, 6 June 2014 15:01 GMT

* IMF to release cash after parliament passes key laws

* Lender to double funding for Bosnia because of flooding

* Lawmakers fail to approve changes to criminal code

* MONEYVAL warns members of risk when dealing with Bosnia

By Daria Sito-Sucic

SARAJEVO, June 6 (Reuters) - The International Monetary Fund (IMF) will unfreeze instalments of its standby loan deal for Bosnia this month after the national parliament passed key laws on Friday, the IMF Resident Representative for the Balkan country told Reuters.

The parliament's upper house approved laws raising excise taxes on fine-cut tobacco and against money laundering and financing of terrorism, required by the lender.

It failed however to approve accompanying changes to the criminal code, also required by the IMF and the Council of Europe's MONEYVAL, a European money laundering and terrorism financing watchdog.

Bosnia's complex postwar settlement, dividing the country into two highly autonomous parts, has contributed to the impasse. Representatives of the Serb Republic oppose adopting a criminal code at the state level. The lower house has however passed the laws.

"This progress is sufficient for us to conclude the sixth and seventh reviews," Ruben Atoyan said, voicing hope that the amendments to the criminal code would be adopted soon.

"We will recommend to our Executive Board to approve the disbursement of new instalments under the standby arrangement some time before the end of June," Atoyan said.

Last Friday, the lender completed a 10-day visit to Bosnia to discuss its 380 million-euro ($517 million) standby arrangement, which was frozen in February after economic reforms stalled, as well as the damage inflicted by recent flooding.

In an interview for Reuters, the IMF said it was ready to double the amount to be drawn from the standby for Bosnia from an originally planned 95 million euros to a total of 190 million, to help it cope with the flood damage.

The heaviest rainfall in more than a century caused rivers in Bosnia, Serbia and Croatia to burst their banks, sweeping away roads, bridges and homes. The European Bank for Reconstruction and Development has estimated the damage in Bosnia at 1.3 billion euros, or 10 percent of GDP.

Parliament's failure to approve the changes to the criminal code could lead to the international Financial Action Task Force putting Bosnia on a list of countries not complying with its recommendations.

MONEYVAL has issued a statement urging its member states to advise their financial institutions to apply enhanced due diligence measures to transactions with persons and financial institutions from or in Bosnia. ($1 = 0.7345 euros) (Reporting by Daria Sito-Sucic; editing by Zoran Radosavljevic and Andrew Roche)

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