By Ljiljana Kovacevic
Republika Srpska’s (RS) fiscal and public fund deficit amounts to about 560m euros, however, the entity government intends to take on more debt through new loans to cover the budget shortfall. The move could, according to government opposition and financial experts, make RS a slave to debt.
Bosko Ceko, the RS auditor general, recently announced that the 2010 entity budget deficit was 395.2m euros, which is 54m euros more than the budget presented by the government of Prime Minister Aleksandar Dzombic. He added that public funds like health, pension and disability insurance and the child protection fund created a total deficit of 173m euros.
“The audit received information that the total [entity] deficit is some 560m euros, after adding up the budget users and funds deficit,” confirmed Ceko.
According to EU criteria, budget deficits should amount to a maximum of 3% of GDP. In RS, it is well over 13%.
“This [budget deficit] ranks the RS with the troubled states. The situation is similar to that in Greece, with a difference that RS is not part of the European Monetary Union and does not need to implement the World Bank and IMF policies. This means that RS must resolve its debt on its own, by taking on more debt,” Sinisa Bozic, an economist, told SETimes.
The opposition says that the cabinet’s economic policy is disastrous, and has demanded the entity government’s resignation.
“This government is conducting a defeatist economic policy. The RS government is in a direct debt crisis,” Democratic Party President Dragan Cavic told SETimes.
The entity government announced it intends to cover the budget deficit by issuing bonds with long-term debt of 61.3m euros from the banks, for a period of ten years and an interest rate of 8%.
To cover the deficit in public funding, the Dzombic government intends to raise new loans worth 120m euros, admitting that RS got further into financial trouble after the IMF, the World Bank, and the European Commission blocked promised money to Bosnia and Herzegovina and its entities for failing to form a state government.
“The government covered its deficits with new responsibilities. Given that soft loans from international financial markets are not available due to the Council of Ministers’ failure, they are going to short-term unfavourable debt with commercial banks, adding debt to unborn generations,” said Cavic.
Bozic says that additional indebtedness gives the entity government a new responsibility: buying social peace, as the ruling Alliance of Independent Social Democrats party remains in power at any cost.
“Such a huge deficit should force the RS institutions into strict savings, rationalisation of expenditures, government activities that focus on new employment [and] attracting foreign investors. Instead, RS intends to take on more debt of at least another 153m euros, which will mean growth of public debt. Someone will have to pay that debt back, and that will be the taxpayers,” Bozic said.
Pensioner Sofija Jankovic is shocked by the amount of RS indebtedness, especially since her pension of about 170 euros has not been raised for years.
“I am worried because there is a real danger that soon there will be no money to pay the pensions. Most pensioners now make ends meet with difficulty, and if that happens, we will be on the verge of starvation,” Jankovic told SETimes.