This year, the Federation of Bosnia and Herzegovina plans a budget of 8.9 billion KM, but representatives who “sit” in the Committee for Economic Policy and Finance of the Federation of Bosnia and Herzegovina in the House of Representatives of the FBiH Parliament, warn that it is a consumer and deficit document that is more electoral than developmental.
The planned indebtedness of 2.3 billion KM, the increase in salaries of civil servants by more than 50 million KM and food inflation of more than eight percent put an additional burden on public finances, while capital investments are practically non-existent.
Analysts warn that this approach leads to long-term unfavorable borrowing, higher interest rates and the risk of forced collections.
This type of consumer and deficit budget seriously threatens the financial stability of the Federation of Bosnia and Herzegovina, because the constant increase in indebtedness and the growth of interest burden the national debt, while the lack of capital investments means that there is no growth in economic activities and the creation of new revenues.
In the long term, this kind of financial policy can reduce the credit rating of the FBiH, make future borrowing more difficult and lead to forced collection measures, while inflation and the rise in the cost of living put additional pressure on budget users and citizens.
Huge debt, no savings policy
Miralem Galijašević (SDA), a member of the Parliament of the Federation of Bosnia and Herzegovina and a member of the Committee for Economic Policy and Finance in this House, tells Faktor that this year’s budget of the FBiH was again released following an emergency procedure with a delay, although it is the legal obligation of the Government to adopt the budget before the new year so that budget users and businessmen can plan.
– We have a budget that, as the government says, is historic, and it is bigger than ever because the debt is bigger than ever. The planned debt is a mere 2.3 billion KM. The reason for this, in addition to the aforementioned increase in pensions, behind which the whole story is hidden, but it is actually the comfortable behavior of all budget users, without a savings policy – highlights Galijašević.
He emphasizes that the salaries of civil servants, ministers, parliamentarians… have been increased, and this is in the budget more than last year by more than 50 million KM.
– Other expenses have also increased. The debt itself is easily explained. We are paying more than 300 million KM interest on the already borrowed billion KM. The entire economic policy of this government is reduced to borrowing. He believes that the Government did not have any policies that mean saving, rational spending, but simply, the budget is populist to satisfy the social appetites of everyone who shows up and asks, starting with social benefits, over all other benefits. I think that we are going into debt slavery and that nothing is being done to create a favorable environment for investment – says Galijašević.
Where is the stabilization that the government promised?
He adds that it is time for the FBiH Government to honestly say whether this is the stabilization they promised?
He emphasizes that the financial policy of this government has caused inflation, and that inflation, when it comes to food, has increased by more than eight percent, and that the total inflation is four percent.
He points out that the Government of the FBiH made preparations for issuing bonds on the London Stock Exchange, by “muscling” the Parliament to not decide on the debt.
– And the decision on responsibility is a constitutional category in all Western countries and it is decided by the Parliament, not the Government. We have a clear situation here, they threw us out of the game, so that they could borrow non-transparently. And so it will be until public revenues are less and less, and at one point they will falter and then confiscation will begin, as is happening in the RS. Indebtedness, compulsory collections will begin, we will lose our rating and we will no longer be able to borrow – concluded Galijašević.
Election budget
Admir Čavalić (SBiH), a representative in the FBiH Parliament and chairman of the Committee for Economic Policy and Finance in this House, told Faktor that this year’s budget of the Federation of BiH is, de facto, an election budget and that it is oriented towards current spending, not capital allocations.
– The budget does not show that there are capital investments. Also, this budget is a consumer-debt budget. The focus is on expenditures, not on the assumptions for collecting additional income and on indebtedness on both the domestic and foreign markets. Something that was announced and expected, has now been realized through the Proposal of the Federal Budget – pointed out Čavalić.
He emphasized that such a budget cannot fall into the category of development and capital budgets, and that this is a consumer budget, long-term debt-oriented.
Overestimated budget because they slow down economic activities
When asked how the Federation of BiH will implement the budget in the amount of 8.9 billion KM, where does this money come from, Čavalic points out that there is now talk of additional borrowing and the like, and the question is whether these public revenues are overestimated as such, that is, whether we will have a lower realization of public revenues due to a slowdown in economic activities.
– It is evident that last year we did not have a significant rate of economic growth, that there was inflation, which makes everything more expensive in the context of public expenditures, and on the other hand, there is also a decline in industrial production. So it is possible that this income side is overestimated as such – explains Čavalić.
The Federation will borrow at a higher interest rate
He points out that it is planned that the Federation of BiH will borrow more than two billion KM and that the assumption is that the budget will be in deficit.
Asked if this means that we will once again reach for money from the London Stock Exchange, Čavalic says that this is expected, and that informal information says that it will be a more expensive debt, writes Factor.
– Why? Because some economic parameters within the Federation of Bosnia and Herzegovina have changed. So, we are not doing very well, as we can see from the official data. This, unfortunately, increases the cost of our indebtedness, that is, other indebtedness. This means that we will be paying a high interest rate, which is far less favorable than some usual arrangements, such as the one with the IMF, which, in truth, requires certain reforms. London Stock Exchange, foreign creditors are not asking for reforms, they are only asking to collect the debt with the associated income as such. These are non-purpose debts and the interest is much higher – Čavalić concludes.
