Representatives of Bosnia and Herzegovina and the International Monetary Fund have reached an agreement in principle on a new loan arrangement worth around EUR 550 million, members of the two negotiating teams confirmed in Sarajevo on Friday after talks that lasted almost two weeks.

The IMF Office in Sarajevo said in a statement forwarded to the local media that agreement had been reached on an economic programme that could receive support in the form of a 36-month expanded arrangement amounting to some EUR 550 million and that the agreement was yet to be confirmed by the IMF Executive Board, which was expected to happen in July.

The agreed loan would be made available to Bosnia and Herzegovina in regular installments over a three-year period on the condition agreed reforms are carried out.

"This is a very favourable arrangement which practically means that we will repay the last loan installment in 13 years," Bosnia and Herzegovina Prime Minister Denis Zvizdic said.

The IMF has estimated that the country's economy is showing significant signs of recovery and that GDP growth this year will reach 3%.

Inflation has remained low owing to the firm tying of the domestic currency to the euro.

The country's economic reform programme, which the IMF will support with the new loan, has three main goals - improvement of the business environment, creation of more jobs in the private sector, and increasing the potential for economic growth.

This will require implementing a set of different measures, from the improvement of the legislative framework to make it facilitate entrepreneurship to a new round of privatisation of state-owned companies and a reform of the tax system and greater autonomy for the country's central bank.

The IMF has made the new credit arrangement conditional also on the removal of shortcomings in the banking sector and on stepping up the supervision of commercial banks and their business operations.

The Prime Minister of the Federation of Bosnia and Herzegovina, the country's Bosniak-Croat entity, Fadil Novalic, has announced also "radical cuts in public spending."

After the IMF's decision, the World Bank and the European Union are also expected to ensure additional loans for Bosnia and Herzegovina to support its development.

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