IMF国际货币组织全球-Bosnia-and-Herzegovina_Request-for-Purchase-Under-the-Rapid-Financing-Instrument_39页_2mb

Bosnia and Herzegovina: IMF Rapid Financing Instrument (RFI) Support for the COVID-19 Pandemic

Core Content

The IMF Executive Board approved US$361 million in emergency support for Bosnia and Herzegovina (BiH) under the Rapid Financing Instrument (RFI) on April 20, 2020, to address the urgent balance-of-payments (BOP) needs caused by the COVID-19 pandemic. This support is intended to help BiH scale up spending on health and social assistance, while preserving debt sustainability.

The economic impact of the pandemic is expected to be substantial, with GDP projected to decline by 5 percent in 2020 and recover to 3.5 percent in 2021. The current account deficit is expected to widen to 7.5 percent of GDP, driven by a sharp drop in exports and remittances. The fiscal balance is projected to drop by 6.5 percentage points of GDP, resulting in a deficit of 4.5 percent of GDP in 2020 due to increased health and social spending and lower tax revenues.

The RFI purchase of 100 percent of BiH’s quota (SDR 265.2 million) will help close the projected BOP gap of €910 million, with the IMF covering one-third of the gap. The EU, World Bank, and EBRD are also expected to provide emergency assistance, which is estimated to be around €100 million and may increase.

Main Views and Key Information

Economic Impact and Outlook

• Economic conditions have deteriorated rapidly due to the pandemic.
• GDP growth in 2020 is projected to fall by 5 percent, compared to a pre-crisis growth of 2.5 percent.
• Fiscal revenues are expected to decline by 2.25 percent of GDP, mainly due to lower nominal growth and delayed payments.
• The current account deficit is projected to widen to 7.5 percent of GDP, with a significant drop in exports and remittances.
• Public debt remains low and sustainable, expected to decline to 26 percent of GDP by 2025.
• The economy is expected to recover to 3.5 percent growth in 2021, but faces major downside risks, including prolonged recession in the EU and further economic contraction.

Fiscal Policy

• A large fiscal expansion is needed to address the health and economic impacts of the pandemic.
• The fiscal deficit is expected to reach 4.5 percent of GDP in 2020, up from a surplus of 2 percent in 2019.
• Health spending and social benefits are to be increased, with a 5.5 percent of GDP increase in public spending.
• Tax revenues are projected to fall by 2.25 percent of GDP, and the authorities have decided to temporarily delay direct tax payments.
• The fiscal stance will return to stabilization levels once the crisis subsides.

Financial Sector and Currency Board

• The banking system is well-capitalized and liquid, but requires high-frequency monitoring.
• The currency board arrangement (CBA) is critical for financial stability and should be preserved.
• The Central Bank of BiH (CBBH) should not use reserves for fiscal purposes but instead modernize its reserve requirement framework.
• The long-overdue Deposit Insurance (DI) law should be passed, and the EBRD credit line for the DI system should be renewed.

Policy Recommendations

• Scale up health and social spending to address the pandemic.
• Preserve the soundness of the financial system and maintain the currency board.
• Coordinate closely between entity governments and lower-level authorities on health and social measures.
• Secure and deploy medical supplies immediately.
• Ensure transparency in the use of additional spending and off-budget items.
• Strengthen the banking sector through enhanced monitoring, loan moratoria, and recapitalization plans if needed.
• Support the currency board through modernization of reserve requirements and fiscal discipline.

Key Documents and Processes

• The Staff Report was completed on April 13, 2020, based on discussions with BiH officials from March 27, 2020.
• The Request for Purchase is equivalent to 100 percent of quota (SDR 265.2 million or about €330 million).
• The Letter of Intent (LOI) outlines the policy commitments of the authorities, which are consistent with the existing Extended Fund Facility (EFF).
• The IMF will continue to monitor the situation and provide policy advice as needed.

Conclusion

The IMF’s support through the Rapid Financing Instrument is a critical measure to mitigate the immediate economic and financial impacts of the COVID-19 pandemic in BiH. The focus is on preserving macroeconomic stability, ensuring debt sustainability, and supporting health and social spending. The authorities are encouraged to revise their budgets and implement transparent and targeted measures to address the crisis effectively.