The International Monetary Fund (IMF) will approve a loan of €150 million for Bosnia and Herzegovina after a political blockade in that country caused the failure of the negotiations on much more ambitious financial support in the amount of €750 million.

The IMF Resident Representative for Bosnia and Herzegovina, Andrew Jewell, confirmed for the Banja Luka based Nezavisne Novine daily that BiH would be given a loan with a symbolic interest rate of 0.5%, adding that this was only part of a package to assist in overcoming the crisis caused by the coronavirus pandemic.

IMF approved its loan through the Special Drawing Rights (SDR) mechanism which has existed since 1969 and is intended to assist country members in crisis situations. To date, it has issued the equivalent of $293 billion.

Jewell said that SDR securities would be issued to BiH by the end of the year.

That will help countries to obtain funds for vaccines and to support economic recovery, said Jewell.

Earlier, IMF had planned to approve a loan of €750 to BiH as long term support to entity budgets and the overall economy, however, negotiations came to a standstill at the start of the year because authorities in the Republika Srpska (RS) entity rejected to accept the obligation to implement reforms that IMF insists on.

The Serb entity authorities object to introducing a single register of all private accounts in the country. RS believes that the state does not have the right to have insight into citizens’ accounts and that that right is exclusive within the remit of the entity authorities.

Jewell has already said that he doesn't understand objections in RS as the measures is aimed at preventing money laundering, which is a regulation that has existed in the European Union for a long time now.

After rejecting cooperation with the IMF, the Serb entity authorities, faced with the pressure of a budget deficit, decided to sell government bonds on the London Stock Market. RS issued bonds valued at €300 million in April but with an interest rate of 4.75%. IMF had offered a loan at a 1% interest rate. Financial experts warned then that decision would cause a loss of at least €75 million over a period of five years.