By Ljiljana Kovacevic
As Republika Srpska marked its 20th anniversary on Monday (January 9th), the government maintains that the entity is economically stable, but some economists are warning of a debt crisis that could lead to bankruptcy.
“In 2012 we expect a worsening liquidity [situation], a drop in the economy, and consequently a drop in consumerism, which will bring us to a worse situation than the year before,” economy analyst Damir Miljevic told SETimes.
He adds that the global financial crisis should not be an excuse for the economic struggles facing the RS, and that the governing structures are mostly responsible for the entity’s fiscal difficulties.
RS Minister of Finance Zoran Tegeltija rejects any suggestion of possible bankruptcy, saying that the RS falls into the category of medium-indebted countries according to European Commission criteria. Total debt, according Tegeltija, is less than 50% GDP.
“The level of total external and domestic debt of RS can’t harm RS stability. The RS problem is internal debt, which is a result of the armed conflict, because the tangible and intangible damage done to people in the armed conflict who have sued the RS must be paid off, as well as the old foreign currency savings,” Tegeltija told SETimes.
RS Prime Minister Aleksandar Dzombic told reporters last month that the entity is economically stable, and in 2012 he expects economic growth of 2.5%.
Miljevic said the economic collapse of the RS and BiH can only be prevented by reducing public spending and creating an efficient administration.
“The financial crisis in Europe, to some extent, will impact Bosnia and Herzegovina (BiH), primarily in the reduced sale of commercial bank assets,” Miljevic said. “This, however, is not the main problem. The main problem is that domestic and foreign investors are not willing to invest in BiH, its poor business environment, widespread corruption, and inefficient administration.”
Economist Sinisa Bozic says the RS is already bankrupt.
“GDP was 4.2 billion euros, citizen bank loans amount to 820m euros, the RS economy debt is 5 billion euros, with a total RS debt of 1.8 billion euros. This means that the RS would have to work two years just to pay off debts, excluding the current spending. It is impossible and this situation is untenable,” Bozic told SETimes.
He adds that the ratio of total debt to real GDP is at least 50%, which is almost the same as in highly indebted countries.
Dragan Cavic, from the opposition Democratic Party, said the biggest problem is borrowing and spending. The government cannot cover the budget deficit through more loans from the state banks, he said, meaning they must turn to international financial markets for new loans.
“However, the IMF, World Bank and European Commission have clearly sent a message that there are no new credit commitments until a state government meets the conditions for further EU integration,” Cavic told SETimes.
He argues the RS government can save money only through additional salary cuts for state employees or layoffs.
Tegeltija denies there will be salary cuts, saying that RS will continue to pay salaries and pensions from the budget and the IMF loan payments. “I can confidently say that RS is in no danger of debt crisis or bankruptcy,” he said.
However, despite such claims the RS parliament recently passed legislation that will pay state clerks a salary 10-25% less in 2012.
Mirjana S, a clerk in the RS government, says her salary is already lower by 10% since 2009.
“If wages are reduced again, I will hardly be able to cover my monthly expenses, including a fairly large loan installment which I’ve been paying off for the last seven years,” she told SETimes.
RS trade unions President Ranka Misic warns that workers’ living standards are becoming worse every day.
“The only way for BiH and RS to survive economically is to establish a stable political situation in the country so funds can arrive, which in turn would allow for the creation of new jobs, salary payments, and increased purchasing power,” Misic told SETimes.