Federation of Bosnia and Herzegovina Government Measures in the Fight Against Inflation

(Patria) - The Government of the Federation of Bosnia and Herzegovina has been focused since February this year on adopting and implementing numerous measures and support programs for citizens, through which it seeks to mitigate the negative consequences of price increases caused by inflation due to the Ukrainian crisis, the Government announced.

The priority is to preserve and continue economic stability, so that more money can be directed to the population, especially the most socially vulnerable categories, from the gross domestic product growth and public revenue collection.

The measures relate to one-time financial support for the population and through subsidizing electricity bills, distributing packages with basic food items and hygiene products. The FBiH Government's programs cover a total of about one million people in the Federation of BiH.

Through the Decree on assistance to the population due to the increase in consumer price indices, the Government of the Federation first ensured the payment of one-time assistance of 100 KM to pensioners, veterans, and civilian invalids. This amounts to more than 530,000 residents who received this type of compensation in their transaction accounts in August and September. 

For further protection of pensioners from inflationary shocks, the Government's decision last month also stipulated a third increase this year for recipients of the lowest pensions. After all pensions, except the highest ones, were increased by a total of 11 percent in April and June, those receiving minimal pensions will receive an additional five percent increase, starting with the November pension payment.

By amending the Decree on assistance to the population due to the increase in consumer price indices, the Government has provided for the payment of a one-time compensation of 100 KM each from the federal budget for another 270,000 unemployed persons in the Federation. Cantonal employment services are responsible for the implementation, and the deadline for completing payments is December 20.

The Federal Commodity Reserves Directorate completed the first round of distribution of packages with basic food items and hygiene supplies for 17,000 beneficiaries from the category of socially needy individuals at the end of September. The same beneficiaries will receive these aid packages in the second round of distribution by the end of November.

Otherwise, acting on the Government's decision from March this year, the Federal Commodity Reserves Directorate also distributed 1.4 million liters of blue diesel, within which each registered agricultural producer received 50 liters of diesel per hectare.

Additionally, the Government's decree enabled employers to pay one-time assistance of up to 1,080 KM to employees. It is foreseen that workers will be assisted in this way by the end of this year at the latest, and employers who do so are exempt from paying taxes and contributions on the amount of support paid.

Unable to influence gas and oil prices, the Government is also subsidizing electricity bills for about 65,000 families from the FBiH Budget in accordance with its decision for a five-month period, in the total amount of 100 KM each.

As of November 12 this year, the Decision of the FBiH Government on prescribing immediate price control measures by setting the highest price for pellets came into effect, which is limited to 480 KM per ton in all packages in retail, plus VAT (561.60 KM). The reason for adopting this measure is the prevention and suppression of unrealistic price setting and potential unfair behavior of certain pellet producers and traders, the protection of citizens' economic interests, and ensuring the orderly supply of the market.

In order to prevent possible abuses of the current situation for the purpose of achieving higher profits, the Government has kept in force the measures to limit prices, which it adopted during the coronavirus pandemic. These are decisions on prescribing immediate price control measures by determining the maximum profit margins for basic foodstuffs and other products, as well as petroleum products.

The limitation applies to 17 types of food products, which includes about 535 products, where wholesale margins must not exceed six percent, and retail margins a maximum of eight percent of the purchase price as of December 31, 2020. Regarding fuel, those engaged in wholesale trade of petroleum products are prescribed a maximum profit margin of 0.06 KM per liter, and for retail traders, 0.25 KM per liter.

Direct allocation of budget funds to citizens

Remaining committed to the principle of directly directing surplus public revenues to citizens who need them most, the Government increased pensions and veteran benefits in 2022 and allocated significantly more funds for agriculture and commodity reserves with the aim of intervening in food prices. Also, laws were adopted that provide material support to certain categories, such as parent caregivers and children from financially deprived families.

Pensions are increased three times this year. The first two increases were a total of 11 percent for all pensioners except those with the highest incomes. At the initiative of Prime Minister Fadil Novalić, recipients of the lowest pensions will receive a third increase of five percent, starting from the calculation for November 2022, bringing the total increase for this category to 16 percent this year.

In April this year, a set of amendments to veteran laws was adopted, introducing the so-called Swiss formula, which guarantees an annual increase in benefits for veteran populations depending on the growth of GDP and prices. Thus, an additional 20 million KM was allocated for more than 104,000 recipients of veteran benefits, and this year's budget of the Federal Ministry for Affairs of Veterans and Disabled Veterans of the Defense-Liberation War is over 358 million KM. From the Federation Budget, approximately one million KM is allocated daily for war invalids, demobilized fighters, families of martyrs and fallen defenders, and recipients of the highest recognitions.

At the proposal of the FBiH Government, several systemic legal regulations with a social character were adopted, regulating the area of monthly income for persons in a state of social need, thereby relieving cantonal budgets.

The Law on Parent Caregivers of the FBiH has thus entered into force, for the implementation of which 27 million KM will be allocated annually from the federal budget. According to this law, one of the parents or guardians who takes care of a person with a disability is entitled to a monthly compensation in the amount of the lowest net salary in the FBiH (currently 543 KM), with corresponding contributions for pension and disability insurance, health insurance, and unemployment insurance.

The application of the Law on Material Support for Families with Children in the FBiH is also beginning. It guarantees the right to child allowance in the monthly amount of 103.17 KM for children from low-income and socially vulnerable families, up to the age of 18. This law covers about 80,000 children in the FBiH.

Also, for all unemployed mothers in the FBiH, regardless of their canton, the income census for receiving monetary assistance has been abolished, increasing the number of beneficiaries from the previous 2,100 to over 9,000. Their monthly compensation cannot be lower than 55 percent of the lowest salary in the FBiH in the first year after childbirth, which currently amounts to 298.65 KM. Cantons retain the option to increase this compensation amount, which some have already done, allocating up to 1,000 KM per month to mothers.

The FBiH Government has also intervened by adopting new pronatalist policy measures through amendments to the Law on Medically Assisted Reproduction. These were adopted to enable all couples in the FBiH to have the right to infertility treatment at the expense of the Federation Budget under equal conditions, with an annual allocation of 10 million KM.

The FBiH Government is also implementing special support programs for young people. This year, it has allocated 61 million KM for the programs of the Federal Employment Bureau. A total of 30 million KM has been provided for housing for young people under favorable conditions at Union Bank d.d. Sarajevo this year, as well as in the previous four years. For the sectors of culture and sports, as well as education and science, which are primarily intended for supporting young people, 28 million KM has been allocated from this year's federal budget.

For returnee populations, 45.4 million KM has been allocated from the FBiH Budget this year, which is double the amount from last year.

Although the price increase is caused by external factors, as a consequence of the pandemic and the war in Ukraine, the FBiH Government, by intervening in strengthening food independence, has secured a record 106 million KM for farmers in the federal budget for this year, which is an increase of 22 percent compared to 2021. Through subsidies, an environment for stable domestic milk production has also been created.

This year, 20 million KM has been allocated from the FBiH Budget to the Federal Commodity Reserves Directorate for the first time, which is ten times more than ever before.

By intervening in strengthening the energy independence of the Federation, the Government has ensured that there will be no electricity price increase for households this year, while electricity prices on the European market have risen enormously. Blocks 4 and 5 of the Tuzla and Kakanj thermal power plants have been put into operation.

Before the heating season, the Government specifically intervened with the Council of Ministers of BiH, initiating a temporary ban on the export of pellets and firewood during the winter, in order to protect citizens from enormous price increases and prevent profiteering by certain firewood producers and traders.

In September, a request was sent from the FBiH Government to the state level to temporarily abolish VAT on natural gas supplies, in order to further mitigate the impact on citizens' budgets due to the inevitable price increase of this energy source.

The Federal Government has also expressed support for the proposal to temporarily abolish excise duties on fuel, but this is also a decision over which entities have no influence, but is made in the Parliamentary Assembly of BiH.

Like the previous two years, the Government has also allocated 239 million KM in support of cantonal and municipal budgets from the FBiH Budget this year.

All of this confirms the fact that the Federation has borne and is bearing the greatest burden of the fight against both the pandemic and inflation. At the same time, the FBiH Government has managed to improve economic stability, thanks to responsible fiscal policy and rational spending.

In the period from 2015 to 2022, GDP growth amounted to 7.2 billion KM, and exports from the Federation increased by almost four billion, achieving the best export results. This has also enabled the FBiH Budget to be the largest ever this year, amounting to 5.6 billion KM.