'...To Quickly Reactivate Bosnia's Economy
and Move from Relief to Recovery'
SARAJEVO, May 7 (Reuters) — The United States granted Bosnia $27.5 million on Tuesday to spur post-war job creation by meeting the country's urgent need for investment financing and medium-term credit. The award, signed in Sarajevo by Bosnian central government Prime Minister Hasan Muratovic and U.S. Ambasador John Menzies, is a down-payment on a three-year, $278 million U.S. grant to create a Bosnian Reconstruction Finance Facility (BRFF)."This grant is part of our effort to quickly reactivate Bosnia's economy and move from relief to recovery here," said Craig Buck, Chief of Mission for the U.S. Agency for International Development (USAID), which made the award. "The program will have a very strong employment impact. We expect 40,000 jobs to be created over the next three years as a direct result of it."
The reconstruction finance facility will increase Bosnia's foreign reserves by providing balance of payments assistance, and will also provide quick disbursal loans to credit-worthy commercial and industrial enterprises. Loans with a maximum three-year maturity and one million Deutschemark ($660,000) ceiling will be made to enterprises at an interest rate of 8-9 per cent per year, with $25 million expected to be pumped out between July and October of 1996.
Funds can be used as operating capital or to buy spare parts or new machinery, repair damaged plant and equipment, hire workers or pay for imports. USAID sources report that bank loans in Bosnia currently have a maximum term of 90 days, are available only for the import and quick resale of goods and carry an interest rate of 3-5 per cent per month.
"Proposed reconstruction finance facility terms are quite generous when compared to local market rates," USAID mission chief Buck said. Repayments of principal and interest will create a BRFF revolving loan fund for further support of Bosnian enterprises.
While the loans will be run through the National Bank of Bosnia and Hercegovina, the Chase Manhattan Bank, operating as a subcontrator to USAID, will provide an underwriting team of seven Americans actually to manage the program. The team, which includes bankers, an auditor and an environmental specialist, will review the loan applications and recommend enterprises for funding to Buck. "We will be targeting industries and firms which use local raw resources such as textiles, wood processing, construction, food processing, leather and light manufacturing," Buck said.
Both private firms and viable state economic enterprises in the process of being privatised are eligible for loans. The Bosnian economy is slowly staggering to its feet after 43 months of war. Unemployment ranges from 60 to 90 per cent in various parts of the country and overall production is at about 10 per cent of pre-war levels. About $1.8 billion in international reconsruction aid has been pledged to Bosnia for 1996 as part of a multi-year, $5.1 billion dollar assistance program.
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