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Bosnia Region PM Offers To Quit, Risking IMF Deal

Nedzad Brankovic led the federation's negotiations with the IMF.

Nedzad Brankovic led the federation's negotiations with the IMF.

SARAJEVO (Reuters) -- The prime minister of Bosnia's Muslim-Croat federation has tendered his resignation, a move that could delay the Balkan country's 1.2 billion euro ($1.67 billion) IMF stand-by loan.

Prime Minister Nedzad Brankovic, who was last month indicted on corruption-related charges, led a Muslim-Croat federation team for three recent weeks of negotiations with the IMF. In those talks, the government risked social unrest by promising significant cuts in public spending and wages.

"I am filing my irrevocable resignation from the post of the prime minister of the Federation," Brankovic said in his letter of resignation to the federation president.

He said he was "asking you to activate my release at the shortest possible notice, as well as other activities needed for the appointment of a new federation premier."

If accepted, the fall of Brankovic's government may jeopardize a stand-by agreement struck earlier this month with the International Monetary Fund, by delaying the fulfilment of the IMF's terms beyond its deadline of June.

Shrinking Economy

The federation government needs to revise the 2009 budget in June so that the parliament can pass it in August.

Bosnia is made up of two autonomous regions, the Muslim-Croat federation and the Republika Srpska, joined under a weak central government. The Republika Srpska government has said it can meet all IMF terms for the stand-by deal.

The country is suffering fallout from the global financial crisis, and the budget of the Muslim-Croat federation is under particular strain because of generous social service benefits granted since the 1992-95 Bosnian war to groups such as veterans and invalids. The IMF expects Bosnia's economy to contract by 3 percent this year.

Brankovic said he decided to quit after a congress of his Party of Democratic Action (SDA), the largest Bosnian Muslim party, reelected Sulejman Tihic as president on May 26.

Tihic, whose party had nominated Brankovic as prime minister after winning an election in 2006, called on Brankovic to resign last month after a Sarajevo court indicted him for abuse of office when he was a general manager of a state company that paid for his apartment.

Brankovic, who has not commented on the accusations, refused to step down at the time, hoping Tihic would not be reelected.

Tihic said on May 26 that he expected Brankovic to resign but that he did not have a candidate in mind to replace him.

"This is Brankovic's showdown with the SDA but the problem is that he is jeopardising the state of Bosnia and Herzegovina," said Vlastimir Mijovic, former editor-in-chief of the Sarajevo-based "Oslobodjenje" daily.

The Bosnian Muslim and Croat ruling parties must agree on a new prime minister-designate within 30 days after the Federation president accepts the resignation.