For Bosnia and Herzegovina government accusing each other in search of a compromise, received criticism from the International Monetary Fund. In its analyses, the IMF again criticized the level of public spending in Bosnia and Herzegovina, primarily the increase in wages, stating that inflation is still at a high level. They are concerned about the marked slowdown in economic activity, which is holding back the reform process. Analysts agree with the part of the recommendations, which refers to the wastefulness of institutions.
The IMF analyzed the situation in Bosnia and Herzegovina and came out with a series of recommendations to reduce public spending due to reforms and limit wage growth or even to return to the previous level, because inflation is still high. There are also obligations to repay overdue loans.
“Of course, this year we have a little more return to international financial institutions, that means some loans that were in the grace period, are now starting to be paid, but I must say that the largest installment is related to the 220 million that the IMF gave when it was corona in 2020. There was a two-year grace period and we are returning those 220 million in three years,” says Zora Vidovic, Minister of Finance of the RS.
Salaries in the public sector in Republika Srpska will not increase, because there are no funds, said the Ministry of Finance of the RS, which partially means the adoption of the IMF’s recommendation. However, the unions of the five branch unions, budget users, do not agree to this, so they announced large protests at the end of the month.
“Unsatisfied with the work of the Government of Republika Srpska as our employer, we believe that they are not doing a good job, that they did not respect the agreements that we made as responsible people, which we verified through the agreement, and when someone violates the agreement, he shows that he has no will for social dialogue with his partners,” Bozo Maric, president of the Trade Union of the Administration of the RS.
Economists point out that the IMF is right when it comes to public spending, but they add that new employment in the administration should also be stopped.
“If you look at the Presidency spending 500,000 marks for two new cars, if enormous funds are being spent on projects that are not promising or will not bring new value, such as the ski resort that has probably swallowed 50 million marks so far, then we really need ask what kind of household behavior it is,” says economic analyst Zoran Pavlovic.
“When it comes to reducing wages, I think that at a time of record inflation there can definitely be no talk of it. Wages, which have been increased in the meantime, have in fact only been adjusted to inflation and not enough. So, I think that any reduction in wages to the administration would was wrong, unjustified,” adds Igor Gavran, economist.
With expenditures growing faster than revenues, the fiscal balance is expected to move into a deficit of 1.5 percent of GDP this year. The need for financing this year grew precisely because of the large repayment of debts, which analysts believe are not worrying from the point of view of repayment, as much as the payment of salaries and pensions are worrying.