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Commission proposes €100 million macro-financial assistance to Bosnia and Herzegovina

European Commission - IP/09/1654   30/10/2009

Other available languages: FR DE

IP/09/1654

Brussels, 30 October 2009

Commission proposes €100 million macro-financial assistance to Bosnia and Herzegovina

The European Commission today proposed to the Council to provide macro-financial assistance to Bosnia and Herzegovina, in the form of a loan of up to €100 million. The assistance would complement the adjustment programme agreed by the Bosnian authorities with the International Monetary Fund to weather the impact of the economic crisis on the country.

The Commission today adopted a draft decision recommending to the Council to provide macro-financial assistance (MFA) in the form of a loan of €100 million to Bosnia and Herzegovina. The loan would be provided in two instalments, tentatively in the second and fourth quarter of 2010. The assistance supports, and is conditional on the respect of the adjustment programme agreed between Bosnia and Herzegovina and the IMF. It complements the latter's financial assistance to the country. The European Parliament is also consulted.

The global economic and financial crisis started to reveal its impact on Bosnia and Herzegovina in the last quarter 2008 when economic activity decelerated and trade dynamics slowed drastically. Public finances increasingly came under stress in early 2009 as the result of falling revenues and high spending commitments. Therefore, the authorities turned to the IMF for external support and agreed a €1.15 billion Stand-By Arrangement programme in May 2009. Bosnia and Herzegovina's GDP is foreseen to decrease by 3% in 2009, and the budget deficit to reach 4.7% of GDP. A slow recovery is expected in 2010.

The European Investment Bank and European Bank for Reconstruction and Development have also enhanced their investment support in Bosnia and Herzegovina and the other Western Balkan countries. The Commission welcomes key support from private EU based parent-banks having a subsidiary in Bosnia and Herzegovina that have committed to maintain their financial exposure on the country.

MFA is an exceptional EU crisis response instrument available to EU neighbours. It is conditional and complements assistance by the IMF. The IMF capacity to help countries with financial difficulties is being considerably increased by EU Member States and other IMF members. The EU recently committed to provide €125 billion to the IMF, which is 35% of the increase in the IMF's lending capacity from $250 billion to $750 billion.

MFA loans are financed through EU borrowings on the market. The money is lent with similar financial terms. In recent weeks the Commission already adopted a similar proposal to support Serbia with a EUR 200 million macro-financial assistance loan ( see IP/09/1475 ) and to support Armenia and Georgia, respectively with € 100 million and € 46 million ( see IP/09/1535 ). For more information on past MFA assistance, including annual reports go to:

http://ec.europa.eu/economy_finance/financial_operation_instruments/market_operations398_en.htm


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