Experts warn: FBiH budget is a billion KM deep hole

By Dženan Đonlagić, Doctor of Economics, Professor at the Faculty of Economics, University of Sarajevo

The issue of public money distribution is one of the most present and controversial issues of today. What is the purpose of such a Budget if, 20 years after the end of the war, the position of man, worker, and pensioner is still miserable.

Can those who made colossal mistakes, such as the wrong economic model of privatization and uncontrolled unproductive public spending, change the system now? They cannot! We have a failure of economic and budgetary policy.

With such a Budget, we remain at the level of the last pre-war year. Being satisfied with an economic growth of 1% per year is ridiculous. The accumulation of deficits and borrowing continues, but not with loans for production, but to cover holes in the Budget. Such a Budget has nothing to do with the necessary reforms.

The budget is like "you can't fall lower than the floor." A patch is sought through new borrowing, and the hole is a billion KM deep! Capital expenditures are a modest 1.35% of the total Budget.

And then, an increase in public spending by 49.5 million KM compared to 2015. Debt repayment expenses are a staggering 975 million KM, with new borrowing of 346 million KM in 2016 alone. The Prime Minister, Deputy Prime Ministers, and ministers seem to have been excellent students, all entering the Budget with a current reserve of 5.1 million KM. More than for the field of science!

The item of a reduction, compared to 2015, of 400 thousand KM for the field of science, and a total of 1.5 million KM for these purposes, is shocking. This Budget is pathetic, if we know, and many do not know, that the key to long-term economic growth is increasing investment in science, i.e., knowledge and skills.

The FBiH Government writes in the explanation of the Budget: "the structure of the expenditure side reflects the implementation of restrictive public spending measures, which represents one of the priorities of economic policy in the coming years. In this context, strict austerity measures continue to be implemented in all segments of public spending." Such economic policy kills the domestic economy. It will not lead to the much-needed economic growth of over 5% annually to move forward. This country needs salary and pension increases. Now, how? Prime Minister and ministers, figure it out! Here are a few key variables for you, such as: new technology, new knowledge and skills, research and development. None of the above is included in your draft Budget.

One thing is certain: reforms through "painful cuts," "strict austerity measures," when the economy is at its lowest growth rates in Europe, are a utopia.