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By Daria Sito-Sucic
SARAJEVO (Reuters) - Bosnia's lawmakers approved a law to cut military pensions on Monday, a key step towards winning funds from the International Monetary Fund (IMF).
The lawmakers from autonomous Bosniak-Croat federation, which makes Bosnia along with the Serb Republic, approved a law that unifies pension rules for veterans of the 1992-95 war with 56 votes for, 12 against, and 12 abstained.
The law must also be approved by the parliament's upper house, which will convene on Thursday, so that the IMF's executive board can release a 40 million euros (34.2 million pounds) loan tranche at the end of April.
The IMF has disbursed 120 million euros of a two-year 405 million euro ($518 million) loan approved in September to plug the budget gaps of Bosnia's two regions.
"Without the (law) adoption, the Federation budget will get into enormous problems," Bosniak-Croat Federation Prime Minister Nermin Niksic told the deputies. "We shall indirectly jeopardise the budgets of the state and the Serb Republic."
The 2.2 billion marka (916.3 million pounds) Bosniak-Croat budget has a 418 million marka deficit, and 300 million are expected from the IMF and the European Commission, which also insists on the terms of the standby programme.
The legislation has divided ex-soldiers, with some groups protesting against pension cuts after 6,000 new beneficiaries have been given the pension rights. Other groups have pushed to be included in the law to have their status finally resolved.
Niksic said that an average pension for more than 29,000 military pensioners will be cut by around 211 marka (105 euro), and that total amount allocated in the budget for such pensions must not exceed 197 million marka, under the IMF terms.
Without the IMF cash, the Federation would have to cut benefits and wages by 31.4 percent from May, and its 10 cantons would not be able to re-programme their 126 million marka debt to the lender under the previous loan arrangement, Niksic said.
He also warned that Bosnia's credit rating would slide down, driving away already cautious investors.
"We are all aware the Federation is in the deepest political crisis since the end of war," Niksic said, referring to a prolonged government crisis in the region.
(Reporting by Daria Sito-Sucic; editing by Ron Askew)