New debt of 900 million means complete collapse of politics in BiH

Bosnia and Herzegovina will borrow 900 million marks from the IMF, which was a kind of conclusion from the meeting of entity prime ministers Fadil Novalić and Željka Cvijanović and state prime minister Denis Zvizdić in Banja Luka. They admitted that they defined a joint platform for negotiations with the IMF and the World Bank.

This type of loan is approved for countries that are ready for deep structural reforms and the elimination of the causes of fiscal instability. These countries have a large foreign trade deficit and have a problem of bureaucratic burden.”

Loans with strict conditions

BiH would repay the IMF loan of 900 million marks over 12 years. There is no longer a grace period, nor extremely low interest rates. Along with the withdrawal of the loan over the next three years, the authorities in BiH must embark on 24 reforms that would permanently eliminate the causes of the constant budget deficit.

BiH's problem is that it has never managed to cover its foreign trade deficit. On the other hand, the state borrowed 600 million marks to keep the huge bureaucratic apparatus alive. That apparatus consumed any thought of opening productive jobs. BiH had a relatively low debt-to-GDP ratio, but its value was constantly decreasing, while the debt was constantly increasing. The state of BiH today does not have accurate data on GDP, nor on its actual debt. Republika Srpska has been borrowing enormously for years through bonds and from commercial banks, and especially bilaterally from Serbia and the Russian Federation, so no one knows its actual indebtedness.    

BiH's problem is not only 540,000 unemployed, but also the number and structure of 740,000 employed. Of these, at least 30,000 are excessive administrative burden and overstaffing of public enterprises. The Republic of Croatia, which has a similar population, has about 1.3 million employed. 

Federation bad, Republika Srpska on its deathbed

State leaders never wanted to undertake public administration reform. Every year they piled up administration and stuffed people into public enterprises, thus creating a voting machine for every election. Clientelism dragged the state into the abyss. The Council of Ministers had an Office of the Coordinator for Public Administration Reform, which was briefly led by Semiha Borovac of SDA. The Office drafted, and governments at all levels adopted in 2006, the state Strategy for Public Administration Reform. Europeans offered money for the Public Administration Reform Fund in BiH. Rational public administration was the first condition of BiH's readiness for European integration. But there was nothing to coordinate, because the entities, the district and the Council of Ministers did nothing on that front.

Recently we learned that SDA nevertheless wants to sell BH Telecom. This was a sign that the authorities had become aware of the depth of the crisis in which the Federation finds itself.

The collapse of the RS banking system has partly shaken even monetary stability. The smaller entity is on the beggar's staff. Now it is plundering state funds while everyone wisely remains silent. No one knows how much that banking collapse will cost. It is a miracle that the question of the responsibility of RS leaders is not being raised, because it was precisely their political arbitrariness that led to such horrors.       

These 900 million KM are the last chance for the state to free itself from the administrative burden, which has long since begun to eat the healthy part of the economy.

It is clear that such a reform will mean the complete collapse of the self-serving policy we have had so far.