The authorities in the Federation of Bosnia and Herzegovina significantly increased pensions this year. This measure comes with a high price and increasing pressure on the budget, he writes BiznisInfo.
Pension growth without income growth
Pensions have increased by more than 11 percent since the beginning of the year. An additional increase is expected from July, so that the total growth in 2026 could reach around 17 percent.
However, this growth is not accompanied by an increase in income. On the contrary, income from pension insurance contributions in the first three months of this year amounted to about 786.9 million KM, which is more than 50 million KM less than in the same period last year.
Fewer employees and lower contributions
One of the reasons for the decline in income is the reduction in the number of employees. At the end of March 2026, there were about 541,800 employees in the Federation of Bosnia and Herzegovina, which is less than before.
However, the key factor is the reduction of the contribution rate from 41.5 to 36 percent, introduced last year to relieve the economy. The expected effects of the increase in employment and wages were not fully achieved, so the second phase of the contribution reduction was postponed.
The growing budget gap
For the payment of pensions in the first three months of this year, about 1.05 billion KM, or about 350 million KM per month, was set aside.
On the other hand, income from contributions covers only about 260 million KM per month, while the remaining amount – about 90 million KM – is reimbursed from the budget.
In total, more than 260 million KM were allocated from the budget in that period in order to cover this deficit.
Warnings due to fiscal stability
The agency S&P Global Ratings has already warned of risks, confirming the credit rating of the Federation of BiH with a negative outlook due to the growth of budget pressure and a possible increase in public debt.
Estimates indicate that pension increases could further increase the deficit in the coming years, especially in the period from 2026 to 2028.
Between social policy and sustainability
Although increasing pensions and reducing contributions are positive moves for citizens and the economy, their combination creates serious pressure on public finances.
In the coming period, the Federation of Bosnia and Herzegovina will have to find a balance between social stability and fiscal sustainability, while relying on new measures such as fiscalization and suppression of the gray economy.
