Representatives of the European Commission
and the institutions of Bosnia and Herzegovina
met in Banja Luka
to discuss the level of approximation and transposition of the EU rules in the
fields of Economic and Financial Issues.
Progress of Bosnia and Herzegovina in its
European Integration process depends on the country's fulfilment of the
requirements of the Stabilisation and Association Agreement (SAA) with the EU.
The delegations of the European Commission
and of Bosnia and
Herzegovina (BiH) reached the following
The Commission welcomed the updated
medium-term macroeconomic scenario that was provided before and presented
during the meeting but stressed downside risks related to it and recommended
the development of a risk mitigation strategy.
The Commission noted that the incomplete structural
reform agenda and the low quality of public finances act as an impediment for
laying the foundation for sustainable and more domestic-driven growth in Bosnia and Herzegovina.
The Commission encouraged BiH to undertake further efforts in its structural
reforms to improve the business environment and to enhance domestic sources of
growth. This includes, inter alia, reforms increasing labour market
participation, pension reform in the Federation of Bosnia and Herzegovina
(FBiH) and the continuation of reforms of the system of social benefits to
increase the propensity to work. The Commission took note of the structural
reform programme of the Republika Srpska (RS) and that the FBiH plans to adopt
a comprehensive economic reform programme by the end of June.
The Commission expressed its concern that
no agreement had been found for the adoption of the 2012 state budget and a
fully-fledged medium-term fiscal framework. This situation seriously hampers
transparency, sustainability and reliability of public finances in BiH. The
Commission urged all parties involved to take all necessary steps to adopt the
Global Fiscal Framework 2012-2014. The Commission took note that preparations
have started for the Global Fiscal Framework 2013-2015. The Commission recalled
that the adoption of the Global Fiscal Framework was also one of the main
conditions to release the Commission's Macro Financial Assistance. The
Commission took note of the engagement that the fully-fledged Global Fiscal
Framework 2012 – 2014 and the 2012 state budget would be adopted within a few
The Commission welcomed the authorities’ willingness
to launch discussions with the International Monetary Fund on a new funding
agreement, which will enhance the credibility of economic policy, while being
also a precondition for the release of the Commission's Macro Financial
Assistance. The Commission noted that the Macro Financial Assistance expires in
early November, thus implying that the authorities should be able to
demonstrate compliance with the conditions and make a payment request in early
August, at the latest.
The Commission highlighted that BiH needs
to improve the quality of public finances by reducing the currently large
public sector as well as by shifting public funds to more growth-enhancing activities.
The Commission underlined that BiH, FBiH and RS authorities need to harmonise
their methodology of fiscal statistics in order to increase the transparency of
fiscal policy and to facilitate the analysis and policy-making. The Commission
expressed its concern that the generous system of social benefits and
privileged pensions still lacks adequate targeting.
Commission noted that the labour market is not functioning properly and encouraged
the authorities to undertake or commission a comprehensive study analysing the
structural causes of market rigidities and the reasons for the low level of job-creation.
The Commission took note of the
difficulties with regard to the privatisation of state-owned enterprises and recommended
developing a comprehensive and realistic strategy for the privatisation of
state-owned enterprises and the reform of public undertakings that provide
The Commission praised the functioning of
the currency board and the exceptionally good cooperation of the banking
supervision agencies of the two entities as a model for cooperation in all
The Commission welcomed that some progress
was made in adopting secondary legislation for Public Internal Financial
Control, while taking note that the administrative capacity in the Federation in
this area needs to be strengthened as a matter of urgency. The Commission
emphasised that the Co-ordination Board of the three Central Harmonization
Units (CHU) providing for a single platform for Public Internal Financial
Control (PIFC) in BiH needs to increase its activities.
The Commission reiterated its concern that the
external Audit Offices remain subordinated to the executive and no steps are
envisaged to anchor them independently in the constitutional order. This is
interfering with the independence of the Audit Offices. This issue was raised
already in 2010 and 2011 in the same Sub-committee.