Coalition of States!: Activate commodity reserves, curb price gouging and the blow to citizens

The Coalition of States!, formed on December 9, 2021, by the Platform for Progress, Independent Bloc, Posavina Party, RED Movement, Valter Movement, and a group of independent deputies and councilors at all levels of government, issued a statement today regarding the current price increases.

"Entity governments, as well as other levels of government, have done nothing for a whole year to curb the unreasonable rise in food prices and overall inflation, which has not been recorded at this level in the last 20 years. Inaction and negligence are being attempted to be masked by justifications of imported inflation, global disruptions, etc. However, the truth is a little different, and the failure to take any measures to mitigate the impact on the already poor living standards of citizens is inexcusable. In this, we can find one of the reasons for the creation of political crises, aggressive attacks on the legal order, the rise of ethno-nationalist rhetoric, all with the aim of diverting attention from the existential problems faced by most citizens of Bosnia and Herzegovina.

Several facts: the pandemic has caused disruptions in the supply chain and led to shortages of certain products and services. This has led to price increases for those products in high demand, with insufficient supply or delayed delivery. These are primarily food items. Therefore, commodity reserves must be urgently activated, the market intervened in by curbing abnormal retail margins, and the most vulnerable categories of the population must be assisted, not with a meager 50 KM, as promised to pensioners, but with targeted and sufficient subsidies for the most vulnerable social groups.

Another reason for inflation in BiH is partially imported inflation, which in developed countries is caused by expansionary monetary and fiscal policy, i.e., printing money, which has led to an increase in government debt, to finance nearly 11 trillion dollars or 10% of global GDP - in monetary injections into national economies. 

The responsibility of our domestic governments for inflation is evident. All who understand the importance of debt control know how much government debt fuels inflation. The past decade has shown that when interest rates fall to zero, the rise in government debt with monetary expansion or money printing leads to significant inflationary pressures, confirming Friedman's saying that inflation is everywhere and always a fiscal phenomenon. Thus, the combination of rising government debt, unplanned huge borrowing by entities from domestic and foreign creditors, along with global disruptions, has led us to an explosion of prices and the worst inflation in two decades. Although there has been no literal money printing in BiH, it has been pumped into the economic system through internal and external borrowing by entity governments to finance the growing budget deficit.

In addition to all the aforementioned inflationary shocks, and in order to preserve social peace, buy time in the conflict with miners, and postpone the collapse of the Elektroprivreda BiH concern, the Federal Government, and then the RS Government, irrationally stimulate inflationary pressure by increasing the price of electricity. This has nothing to do with market electricity prices, as governments determine prices through their own electric utility administrations. The price of electricity, which is included in almost every product and service, creates new inflationary pressures on the entire market, and huge increases in energy prices will have a chain negative balance on job losses, rising inflation, falling living standards, falling production and exports. All of this is a consequence of disorder in the energy sector and temporary firefighting by shifting costs from electric utilities to the real economy, private companies, and households.

The structural problems of the mines and the concern cannot be solved by transferring the burden to the entire BiH economy and its citizens. It is understandable that governments are trying to solve problems accumulated over years, through mismanagement, corruption, party employment of unnecessary staff, and false promises made to miners, by financing them from our wallets. However, it is a reckless deception that this must be done because of the lowest energy prices in the region, pervasive inflation, etc. Low energy prices compared to other countries existed 10 years ago, and there were no radical price increases. The Coalition of States! calls on governments to ease the pressure on the domestic economy and consumers, not to create new pressure," the statement said.