Budget envisages aid to economy and healthcare in FBiH amounting to 550 million KM

SARAJEVO, (Patria) - The Government of the Federation of BiH, at today's session in Sarajevo, determined and sent to the FBiH Parliament under an urgent procedure the Proposal of the Budget of the Federation of BiH for 2021 in the amount of 5.436.251.7 million KM, which is a decrease of 72.6 million KM or 1.3 percent compared to last year's.

The proposal represents, as explained, a framework for stabilizing public finances in the Federation of BiH and the continuation of measures by the Government of the Federation of BiH aimed at stabilizing and recovering the economy. The preparation of the budget for 2021 was marked by a double pressure, the expected reduced level of revenues and receipts on one hand, and the need to help not only the economy affected by the coronavirus pandemic through intervention measures, but also lower levels of government that do not have the possibility or sources of borrowing to cover their deficits. For this reason, the needs for financing expenditures and
expenses in 2021 have significantly increased to 1.05 billion KM. Given that this amount far exceeds domestic sources of financing, it will be necessary to secure financing from international financial institutions. Therefore, Bosnia and Herzegovina has requested an Extended Fund Arrangement (EFF) from the International Monetary Fund for 36 months, whose main goals are to mobilize sufficient resources in the health sector, provide temporary support to the income of citizens and businesses, strengthen the resilience of the financial sector, and improve growth in the medium term.

When the recovery gains momentum, the program's focus will increasingly shift to structural reforms to support the transformation of the economy. This will include accelerating the implementation of capital projects, increasing spending efficiency, and reducing vulnerability to corruption by improving oversight and management in public enterprises, e-government, fiscal transparency, and procurement practices.

Also, the first tranche of Macro-financial Assistance from the European Commission in the amount of 150 million KM is planned out of a total of 300 million KM foreseen for the Federation of BiH, and the final
phase of harmonizing the Loan Agreement and the Memorandum of Understanding related to this agreement is underway.

Given that the Government of the Federation of BiH is committed to continuing measures to mitigate the negative consequences for the economy, funds for the Economic Stabilization Fund in the amount of 150 million KM have been planned again, under the budget of the Government of the Federation of BiH. An amount of 50 million KM is also planned for employment projects, in order to at least compensate for the lost jobs due to the pandemic and return to the employment level before its outbreak.

By establishing a guarantee fund at the Development Bank of FBiH, economic entities have been enabled to access the capital necessary for both working capital and liquidity improvement, as well as for
investments. Therefore, through the relevant ministries, a total of 15 million KM is foreseen for subsidizing or regressing interest and guarantee costs on loans approved through the
guarantee fund.

Considering the expected decrease in tax revenues, especially from profit and income taxes that belong to cantons and municipalities, financial assistance to lower levels of government is planned in the form of
support for the implementation of structural reform measures in the amount of 230 million KM, of which 200 million KM is foreseen for cantons, and 30 million KM for cities and municipalities. The intention is that part of this amount be used to support cantonal budgets and part, depending on the specifics of cantonal economies, be used to implement structural reforms foreseen in the Letter of Intent.

A significant amount of funds is also planned for the rehabilitation of healthcare institutions in FBiH in the amount of 60 million KM, as well as 12 million KM for the procurement of COVID-19 vaccines.

Along with the Proposal of the Budget of FBiH for 2021, the Government has also sent to the FBiH Parliament under an urgent procedure the Proposal of the Law on its execution, and the Proposal of the Decision on giving consent to the Financial Plan of the Health Insurance and Reinsurance Fund of FBiH and the Decision on the manner of its execution.