June 30, 2015 / 3:12 PM / 4 years ago

Bosnia's FinMin says new deal with IMF in jeopardy - paper

* A possible new loan deal with IMF endangered-FinMin

* Regions face serious budget cuts

* No new financing sources in sight, Bevanda says

SARAJEVO, June 30 (Reuters) - Bosnia’s new loan deal with the International Monetary Fund is under threat because of disagreements on reforms between the country’s two regions, a top government minister was quoted as saying on Tuesday.

The Serb Republic and the Bosniak-Croat Federation badly need IMF cash to plug their budget holes and will have to cut spending across the board without those funds, Bosnia’s Finance Minister Vjekoslav Bevanda told the Vecernji List daily.

The two highly autonomous regions, created under a peace accords that ended the Bosnian 1992-95 war, are linked via a weak central government in which Bevanda serves as a minister. He held the job of prime minister in the previous government.

“I fear that the arrangement with the IMF has been endangered,” Bevanda said of the failure by ministers from the two regions to agree on reforms requested by the lender.

“But this is not the only consequence. The arrangement with the World Bank and all other big world financiers are also at stake, and this is the real devastating effect of the failure of negotiations with the IMF,” Bevanda said.

The lender left Bosnia last week after a two-week visit to review the implementation of economic policies agreed under a previous 33-month aid programme, worth around 630 million euros ($706.23 million), which expired this month.

It also negotiated a reform programme for a possible new loan deal but no agreement was reached, mainly because the authorities have failed to implement previously agreed measures to improve tax administration and tax collection, boost control of banks and improve business environment.

The lender has said it wanted to see some of those measures implemented before it could approve a new deal under new terms.

The two regions’ budget gaps together amount to about 1 billion Bosnian marka ($572 million). The Federation has said it would cut spending in its 2015 budget while the Serb Republic still hopes to get a long-promised bank loan from Russia.

Bevanda was sceptical about alternatives to the IMF loan. Both regions have issued domestic debt since the IMF froze its loan last September, but this was not sustainable.

“There are no (other) sources of financing,” he said. “Honestly, I don’t see how the regions can service their current budgets.”

He said that regional budgets would have to be revised down, cutting all spending except pensions and social payments. ($1 = 0.8921 euros) (Reporting by Daria Sito-Sucic; Editing by Zoran Radosavljevic and Jon Boyle)

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