SARAJEVO (Reuters), – On Wednesday, the International Monetary Fund (IMF), warned Bosnia’s self-governing Serb Republic to stop dismantling its state tax authority. This was a step that would endanger a vital source of national income and harm the economy.

Milorad Dodik of Bosnian Serbs, who supports a “peaceful division” of Bosnian, requested the assembly to meet on Friday and discuss the removal of the Serb Republic (Serb Republic) from key institutions in Bosnia including the Indirect Tax Authority.

Andrew Jewell from the IMF’s resident representative in Bosnia stated that “we believe this action would have harmful economic consequences.”

The U.S. sponsored Dayton peace agreements that ended the 1992-1995 conflict in Bosnia saw it split into two independent regions, the Federation and the Serb Republic. Both were dominated by Croats as well as Muslim Bosniaks. They were linked by a weak central administration.

Dodik, the Serb Republic, announced in October that it would be withdrawing from Bosnia’s Armed Forces, Top Judiciary Body and Tax Administration, which are crucial pillars of security, law and fiscal systems.

Dodik currently serves as the Serb representative of Bosnia’s inter-ethnic tripartite presidency. Dodik has been complaining about state institutions for a long time, claiming that they were created on the advice of international peace envoys, and not in the constitution.

Jewell stated that ITA is one of Bosnia’s most respected institutions, and that the indirect taxes collected through the agency are the most important source for revenue to the Balkan countries’ multiple governments.

Jewell stated that Bosnia’s withdrawal from the “proven framework to collect and distribute indirect taxes” would result in a return to a time when there was widespread tax evasion, which is what happened to Bosnia.

He stated that the dismantling of the ITA would jeopardize the servicing Bosnia’s foreign borrowings. The ITA provides this service via an automated mechanism, shielded from political interference. This will likely affect investor sentiment as well as increase borrowing costs.

As the Steering Board for the Peace Implementation Council, the international body that oversees Bosnia’s peace and stability, meets to address what many consider the most serious crisis since the end of war, the IMF gave the statement.