State-Building and Democratization in Bosnia and Herzegovina by Soeren Keil & Valery Perry

Author:Soeren Keil & Valery Perry [Keil, Soeren & Perry, Valery]
Language: eng
Format: epub
Tags: Peace, Political Science, Nationalism & Patriotism, Political Ideologies
ISBN: 9781317050261
Google: k_qqCwAAQBAJ
Publisher: Routledge
Published: 2016-03-03T14:04:25+00:00

Post-Dayton BiH—Economic Restructuring and International Community

The IMF, World Bank, and Debt

Immediately after signing the DPA that formally ended the war, BiH became a member of the IMF, and the door was then open for membership in the World Bank and its associated bodies (IBRD, IDA, IFCA, MIGA).2 Since the beginning of its engagement, the IMF has been playing a key role in designing and assessing economic policy in BiH. The World Bank, European Commission, Office of the High Representative (OHR) and others followed the status of BiH in the IMF, defining measures in the areas of monetary and fiscal policy, structural and external sector measures. Enormous war damages, 1 million displaced persons, 1.2 million refugees, and 90 percent unemployment put three major challenges in front of BiH (World Bank 1996):

• Implementing the reconstruction and recovery program necessitated by the war damage.

• Developing the new governance structure and institutions for economic management.

• Managing the transition to a market economy.

The international community was ready to provide support to the country through a $5.1 billion reconstruction program. During the first three years after the war, close to $5 billion was provided through various mechanisms ($2.0 billion in 1996; $1.2 billion in 1997; and $1.5 billion in 1998) (World Bank 1998). Immediately after becoming a member of the IMF (with a proportional share of membership based on BiH’s position in the former Yugoslavia), the IMF in addition approved $30 million of SDR (Special Drawing Rights) of emergency aid. However, this IMF initial support was partly spent on repayment of debts acquired before and during the war. It is important to note that this manner of accepting a country into the IMF based in large part on initial loans was the only case in the history of the IMF, reflecting the economic and political circumstances in BiH after Yugoslavia’s dissolution and the 3.5 year-long war (Hadžiahmetović 2011). The IMF disbursed the remaining “emergency aid” in establishing budgets at different levels in BiH, and later on, through support to the Currency Board arrangement (Central Bank BiH). Since 1998 the IMF has been providing balance of payments support, budgetary support and support for monetary, fiscal and structural reforms through regular Stand-by arrangements (SBA). So far, there have been four SBAs with the IMF (1998, 2002, 2009, 2012), and the total amount drawn by BiH is close to 712 million3 of the Special Drawing Rights (SDR) (that is, close to 1.1 billion USD4).

Of the total amount of funds invested in reconstruction programs, 25 percent were funded by the World Bank (directly or through other funds). The World Bank projects had substantial financial support of other national donors, who, together with the European Commission facilitated coordination and monitoring of the reconstruction and transition programs (World Bank BiH, 1998). During the first few years the aid funds were invested mostly in infrastructure programs and projects. Reconstruction of physical assets (over 50 percent of funds disbursed) was marked as the most successful aspect of the Priority Reconstruction Program by the end of 1998.

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