Old debts force up Bosnia Federation Budget

Fecha de publicación: 
25 Nov 2013

The government of Bosnia's Federation entity has presented the entity's draft budget for 2014, saying it is nearly double this year's budget in size, as it has to include paying off old loans.

The entity has to repay around half a billion euro in these loans. The authorities hope a new tranche from an IMF stand-by will bridge the chasm.

But to get another IMF financial injection, the entity government first has to adopt a budget for next year on time.

Entity Prime Minister Nermin Niksic said the budget for next year was being set at 2.3 billion KM [1.2 billion euro].

“Our operational budget from 2014, aside of these repayments, is 1.4 million KM [0.7 million euro], which matches our revenues,” Niksic explained to lawmakers on Friday.

According to estimates, Bosnia and Herzegovina as a whole owes around 7 billion euro, 70 per cent of which is owed to foreigners.

The Federation entity's share of the foreign debt is 63 per cent, whole Republika Srpska owes 36 per cent of it. The rest is state-level and from the Brcko District.

Ruben Atoyan, IMF representative in Sarajevo, told Balkan Insight that Bosnia's total debt is likely to be equivalent to 45 per cent of GDP by the end of 2013, compared with 33 percent of GDP back in 2007.

"While this level is still lower than in many other countries in the region, it is a fairly high level for a country like BIH, an emerging economy with a fixed exchange rate regime and no access to international capital markets, making the country vulnerable to economic shocks," Atoyan noted.

"While lowering the public debt is a must for BIH, it is also important to avoid a sharp fiscal contraction that would cause substantial social hardship and undermine the still fragile economic recovery," he added.

Atoyan said the focus should be on structural measures, such as reducing the size of the government, reforming entitlement programs and better management of public finances.

Bosnia and Herzegovina has been under a two-year IMF standby arrangement worth some 400 million euro since last year. Another budget-saving tranche is expected next month.

"I know that there is a concern in it comes to implementation of this year's budget, but...we are still waiting to get the IMF tranche," Niksic said, referring to worries about the size of the debt.