March 14, 2012 / 3:12 PM / 6 years ago

UPDATE 1-Bosnia will ask for new IMF arrangement -PM

* Bosnia sets 3-yr budget framework at $643.6 mln per year

* New deal should replace IMF standby loan ending in June

* IMF declines comment for now (Adds background)

By Daria Sito-Sucic

SARAJEVO, March 14 (Reuters) - Bosnia will ask the International Monetary Fund for a new loan deal, the country’s Fiscal Council decided on Wednesday, after it met the IMF’s key demand by agreeing on a three-year budget framework.

“We decided to ... start negotiations for a new arrangement with the IMF,” Prime Minister Vjekoslav Bevanda, who chairs the Fiscal Council, the country’s top decision-making body, told a news conference.

The two regions that make up Bosnia have each forecast gaps in their respective budgets this year as access to external funding has become increasingly difficult. Both see the IMF loan as the most favourable solution for covering budget holes while keeping fiscal discipline.

The Federation, dominated by Croats and Muslims, and the Serb Republic, co-exist side by side under a weak central government and contribute a major part of its budget.

Bosnia clinched a 1.1 billion euro ($1.44 billion) standby deal with the IMF in 2008 but it was frozen in October 2010 over delays in reforms. The lender disbursed around 380 million euros under the deal, which expires in June.

Before reopening negotiations, the IMF wanted to see the formation of a new central cabinet following an October 2010 election and the adoption of a general fiscal framework for 2012-2014 and a budget for 2012.

After 16 months of deadlock between its rival Serb, Muslim and Croat leaders, Bosnia formed a new central government in February and passed two long-delayed laws needed for it to progress towards membership of the European Union.

Bevanda said the general fiscal framework for the consolidated central budget in the next three years was set at 950 million Bosnian marka ($634.6 million) per year.

It was based on 750 million marka tax revenues per year, excluding funds for servicing foreign debt and foreign loans.

“We have now created the basis for drafting the budget for 2012,” Bevanda said, adding that he would ask the IMF in a letter to start talks on a new deal.

The Fund’s Resident Representative in Bosnia, Milan Cuc, declined to comment on Bevanda’s announcement, saying it had yet to be officially informed of the decision.

The IMF has repeatedly urged Bosnia’s authorities to come up with a common strategy on economic policymaking in order to resume talks with the lender. Bosnia’s two autonomous regions have virtually independent economies and public finances and only seek agreements about the central government budget.

Reporting By Daria Sito-Sucic; Editing by Catherine Evans

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