Bosnia’s autonomous Bosniak-Croat Federation approved a new law granting wider benefits to war veterans, in a pre-election sweetener that defied warnings by the International Monetary Fund that it may jeopardize long-term fiscal stability.

In an urgent session called amid a protest staged by several hundred veterans of the 1992-95 Bosnian War, deputies in the 98-seat parliament approved the new legislation with 58 voting in favor.

The measure ignores advice by the IMF, which postponed a final meeting last month to review Bosnia’s loan program that would have unlocked fresh aid, because of new spending measures by its two autonomous regions.

The lender has said a new mission will have to visit Bosnia to look at the effects of the legislation, which puts at risk the completion of the review of Bosnia’s 553 million-euro ($647.01 million) loan program.

The IMF said the law on benefits for veterans was flawed, because the number of beneficiaries and the cost of the benefits had not been worked out. 

Bosnia is made up of two autonomous ethnic regions, the Bosniak-Croat Federation and the Serb Republic, and most IMF funds go directly to the regional authorities.

The lender has said the Serb Republic violated terms agreed under its loan deal after its parliament last week approved a bill raising public sector wages by up to 12.5 percent.

The laws in both regions are seen as sweeteners ahead of parliamentary and presidential elections in October.

In February, the IMF disbursed a 74.6 million-euro tranche to Bosnia after its aid program was unblocked following an 18-month halt over delays to reform.
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