Photograph: Photo by Bruno Sanchez-Andrade Nuño, used under CC BY

Bosnia and Herzegovina is for now left without more than EUR 500 million of financial support from the International Monetary Fund (IMF), local media reported on Thursday warning that this is a direct consequence of a blockade of reform processes and Bosnia's European path.

Earlier it was expected that the IMF Executive Board would approve a new, EUR 550 million loan arrangement for Bosnia at its session next week.

It was supposed to be a favourable loan, with a three-year withdrawal period, a symbolic interest rate of 1.05% and a four and a half year grace.

Instead of two-year stand-by deals which Bosnia has had so far, the new loan was to be granted through the Extended Fund Facility (EFF) programme which was expected to secure long-term financial stability through the implementation of radical reforms.

The IMF loan would have also been used to stabilise entity budgets.

An adviser in the Bosnian Federation entity government, Goran Mirascic, told the news agency Fena that the authorities were notified that the decision on granting the loan had been postponed, the formal reason for the postponement being that not all government levels in the country had signed a letter of intent required by the IMF.

However, the head of the European Union Delegation in Bosnia, Lars Gunnar-Wigemark, and U.S. Ambassador to Bosnia Maureen Cormack warned last week that the IMF and other international financial institutions and banks would deny Bosnia new loans because the international community planned to make financial assistance to the country strictly conditional on reform implementation.

The reform implementation on which the international community is insisting is being blocked by the authorities of the Bosnian Serb entity. The Republika Srpska government has refused to give its consent to the adjustment of the country's Stabilisation and Association Agreement with the EU aimed at opening the Bosnian market to limited customs-free imports from Croatia. The Serb entity is also slowing down talks on a mechanism to coordinate relations with the EU because it wants the entities to be given the right to veto any decision in the process of negotiations with the bloc.

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