SDA’s Obstruction of IMF Agreement is Unacceptable

July 14, 2016

In recent years, IMF funding has been an important form of assistance to BiH-level institutions and the Entities in their efforts to address global economic challenges and the costs of reforming their post-war economies. IMF representatives have negotiated the details for these funding mechanisms on an annual basis with the leaders of both Entities. This was the case in 2016 as well, and in the spring of this year RS, Federation, and BiH leaders reached consensus on a new agreement with the IMF, no small feat given the preconditions set by the IMF and the resulting lengthy and painful negotiations required for inter-entity cooperation. But now, despite the fact that they agreed to the text of the new agreement, the representatives of the Federation and the BiH administration are refusing to sign the document. They are doing so in a dangerous attempt to coerce the RS Government to acquiesce to their demands on a completely unrelated issue. This kind of political gamesmanship is reckless, and is likely to have negative consequences for innocent citizens across BiH.

There is currently no disagreement between the Federation and RS governments concerning the IMF loan arrangements. Instead, the Federation and BiH are holding up the IMF deal to punish the RS for objecting to some aspects of a proposed adaptation to the Stabilization and Association Agreement (SAA), the multi-chapter document that details the relationship between the EU and BiH as a future candidate for EU membership, and a neighbor of EU member-state Croatia. The bulk of the SAA deals with trade regulations; specifically, it sets out the process of establishing a free-trade regime between the EU and BiH. While the EU claims that the SAA will “be of benefit to the people of BiH,” RS President Milorad Dodik has pointed out that the RS will bear roughly 70% of the costs and losses resulting from the agreement. According to President Dodik, BiH already faces a trade deficit of two billion BAM in the fields of agriculture and manufacturing, which would increase under the adaptation to the SAA. Most of the farms and industries that would suffer are located in the RS, a fact that BiH and Federation officials aren’t acknowledging or offering to compensate for.

As is too often the case, EU negotiators left the Entities out of most of the SAA adaptation process, and now they’ll have to go back and cobble together a compromise all parties can accept. But that has nothing to do with the IMF deal, which both Entities and the BiH Council of Ministers approved, after talks in which the RS and Federation prime ministers displayed an admirable degree of coordination and cooperation. Now Federation PM Fadil Novalić and BiH Council of Ministers chair Denis Zvizdić—both members of the SDA—are withholding their final signatures until the RS gives up its right to negotiate a trade regime that would not disproportionately penalize RS industrial workers and farmers and their families. It’s a cynical political maneuver; it’s also one that will hurt Federation citizens and institutions just as much as, if not more than, those in the RS. President Dodik and Prime Minister Cvijanović have already said that the RS has plans to make up the budget shortfall by selling bonds; the Federation doesn’t seem to have a plan B.

Recently German chancellor Angela Merkel acknowledged the financial burden the SAA places on the RS, and has offered to discuss a program to mitigate the injury through compensation. In contrast, despite the very real damage the SDA’s gambit will cause to the people of BiH by denying them access to IMF funds, the High Representative, the EU, and the United States have ignored the brinksmanship and obstructionism of the SDA and pressed the RS to accept the SDA’s blackmail and the inequitable trade provisions of the SAA.

The IMF is an independent institution, and has negotiated the terms of its financial support carefully to accomplish important reforms while providing funding to offset their short term impact. The foreign powers working to push reform forward in BiH should take care not to disrupt the IMF program on which all BiH citizens depend or encourage the SDA’s reckless politicization that currently threatens the IMF’s arrangements. Instead the international community should press for approval of the previously agreed IMF program and insist that approval of the SAA include a reasonable remedy to the SAA’s shortcomings.

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