Rogues at the End of Their Careers: With IMF Loan, the Government Will Barely Cover Old Debts

The International Monetary Fund agreed to the demands towards Bosnia and Herzegovina in January this year, after which a Letter of Intent on reforms that must be implemented over the next three years was sent from Sarajevo.

For the first time, we will receive an extended arrangement with the IMF, which will allow a grace period of four and a half years. The reforms will have to be completed from 2016 to 2019. The first goal is business reform to improve the business environment and increase employment. The second goal is the reduction of public debt, and the third is achieving financial stability and reviving bank lending activities.

There is no doubt that the enormous amount of the annual debt installment was the key motive for going to the IMF on bended knee. And this applies not only to the authorities in the RS but equally to the authorities in the Federation.

Either Reforms or Bankruptcy

Within the framework of the reforms, the Law on Excise Duties must be amended to finance the further construction of Corridor 5c. Furthermore, the business environment must be improved by reducing contributions. Amending the law will expand the tax base to include hot meals, holiday pay, and transportation costs. The focus is on financial stability, primarily of the banking sector, after the collapse of banks in the RS.

A special type of cooperation is required between the entity banking agencies and the Deposit Insurance Agency. Fiscal discipline must be improved in both entities, and certain taxes and contributions must be harmonized.

A special element in this financial consolidation concerns the preservation of the Currency Board and the independence of the Central Bank of Bosnia and Herzegovina. The latter has never been worse. Namely, the CBBH has almost been turned into a subsidiary service of the Council of Ministers.

There is still little or no talk about public administration reform. The reduction of the bureaucratic apparatus is carefully and gently mentioned in statements by officials of the Federation Government, so as not to upset the voter clientele built carefully over the years. This is the most sensitive issue of the Reform Agenda and the Letter of Intent to the IMF. Thus, the government is again acting insincerely and once again awakening rogue abilities to postpone the day of reckoning.

In our neighboring countries, they have already seriously approached the rationalization of public administration. In Serbia and Croatia, there is public discussion about reducing the administrative apparatus, and exact figures of surplus employees are given. Unfortunately, here again, the naturalistic term "natural outflow" is mentioned. It is known that the moratorium on hiring in the administration, which is discussed both in the cantons and the Federation, is a matter of empty talk. Officials of the Federation Government claim that they reduced the number of employees by 1,750 last year, and that in the first four months of this year, there are 1,100 fewer employees.

Of course, no one mentions the more than ten thousand new pensioners who, upon the announcement of a new unfavorable law, rushed into retirement and burdened the entity funds. Although the new law has not yet been passed, we have received a huge influx of new pensioners, which is why today in the Federation Government they talk about the successful reduction of the number of employees in the administration. Many link the bait of the new retirement law precisely with the move by the Federation Government to reduce the number of employees in the administration. But we gained on the bridge and lost on the ford. If the authorities think they can solve all the IMF tasks in this way, they are mistaken.

Installment Over One Billion KM

This year's amount of debt awaiting the Federation is shocking. It is entirely unclear whether any funds will remain to pay the due credit obligations. The Federation Government announced that it will borrow 712 million marks this year as well. This includes the IMF tranche of 312 million, while an additional 400 million will be borrowed from the sale of bonds and treasury bills. The government treats this borrowing as "neutral," which is absurd. Like any loan, the one from bonds or treasury bills must be repaid on time.

The principal amount that the Federation must service this year is 974.9 million marks, plus interest of 123.3 million KM. Therefore, this year, creditors need to be repaid one billion and one hundred million KM. Equally tragic is the RS's annual annuity of 600 million marks. By the end of the process from the IMF Letter of Intent in 2018, the RS's annual debt will amount to 888 million marks. Who will repay it without going bankrupt? So, reforms or bankruptcy.

An equally tragic sum of annual debt awaits us next year. Therefore, it is impossible to exit this financial bubble painlessly, into which both the Federation and the RS have fallen. All cheap talk and attempts at new rogue frauds from the authorities will be meaningless. The Federation simply must do what is stated in the Letter of Intent and the Reform Agenda. All the inaction and all the acrobatics we have watched for two decades no longer make sense. This country has only been piling up problems and debts. Need it be said that in the end, one drop always makes the cup overflow.