REALISING BOSNIA AND HERZEGOVINAS EUROPEAN POTENTIAL: FROM WAR ECONOMY TO CREDITWORTHINESS AND...
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Transcript of REALISING BOSNIA AND HERZEGOVINAS EUROPEAN POTENTIAL: FROM WAR ECONOMY TO CREDITWORTHINESS AND...
REALISING BOSNIA AND HERZEGOVINA’S EUROPEAN POTENTIAL: FROM WAR ECONOMY TO CREDITWORTHINESS AND SUSTAINABILITY
MACRO AND FISCAL FRAMEWORK
Ljerka Marić, Minister of Finance and Treasury - BiH
International conference on development of Bosnia and HerzegovinaCG Meeting on Bosnia and Herzegovina
Sarajevo, September 22 and 23, 2004
In the first half of this year BiH Council of Ministers together with FBiH Government and RS Government adopted Mid-Term Development Strategy BiH (PRSP) for period 2004-2007. It is a first strategic document agreed and approved by the BiH authorities without involvement of the international community.
Prior to the approval of the PRSP, wide consultation process was organized with participation of NGOs, youth, private sector, trade unions, academics, donors, and ordinary citizens.
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by end – 2007, achieve 70% of GDP from 1991
by end – 2007, restore a partial creditworthiness on the international capital markets
create economic preconditions for faster integration of BiH into EU
BASIC GOALS OF MEDIUM-TERM DEVELOPMENT STRATEGY ARE:
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Reduction of unemployment rate by 20% relative to the current unemployment rate
Reduction of poverty rate by 20% relative to the current poverty rate
Signing Stabilization and Association Agreement with the EU
CRITERIONS FOR SUCCESS OF MEDIUM TERM DEVELOPMENT STRATEGY (PRSP) ARE DEFINED AS:
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Preservation of macro-economic stability;
Implementation of fiscal reform;
Faster growth of private sector;
Implementation of anti-corruption strategy;
Strengthening of financial sector;
Implementation of labor market reforms;
Implementation of public administration reform;
Implementation of several sectoral reforms, among them the most important being:
IMPLEMENTATION OF MEDIUM TERM DEVELOPMENT STRATEGY REQUIRES REALIZATION OF THE FOLLOWING PRIORITIES:
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Liberalization of electricity market
To continue liberalization of telecom market
To implement reform of higher education
To implement reform of health system financing
To establish adequate system of social protection
To start reform of pension system
To adopt and implement new legal and institutional framework for forestry management
To provide adequate support for agricultural production
To define industrial policy of the country
To introduce system of electronic relations with citizens (e-government)
To implement National Environment Protection Plan
To improve road construction management and road maintenance management
To continue reconstruction of railways 6
REAL GDP GROWTH TARGETS
4,0%
5,5% 5,5% 5,5% 5,5%
0%
2%
4%
6%
2003 2004 2005 2006 2007
Source: BiH Medium-Term Development Strategy - PRSP 7
0,9%
1,8%2,0%
2,2%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
2004 2005 2006 2007
Source: BiH Medium-Term Development Strategy - PRSP
CPI PROJECTION
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FISCAL DEFICIT PROJECTIONS
0,4%
-0,1%
-0,7%-0,8%
-0,6%
-1,0%
-0,5%
0,0%
0,5%
2003 2004 2005 2006 2007
Source: BiH Medium Term Development Strategy - PRSP 9
REDUCTION OF PUBLIC EXPENDITURE SHARE OF GDP
31,4%35,6% 36,6%
41,9% 42,6% 43,6% 43,8%
50,4%
0
20
40
60
80
Albania Romania FYRoM Bulgaria Poland Slovenia CzechRep.
BiH
%
Source: BiH Medium-Term Development Strategy – PRSP (Data for 2002) 10
PUBLIC EXPENDITURE PROJECTIONS
46,3% 46,0%45,4%
44,3%
43,1%
35%
37%
39%
41%
43%
45%
47%
49%
2003 2004 2005 2006 2007
in %
GD
P
Source: BiH Medium Term Development Strategy - PRSP 11
PUBLIC EXPENDITURES REDUCTIONPLAN 1
Source: BiH Medium-Term Development Strategy - PRSP
Defense(%GDP)
5,1%
2,7%
1,9%2,3%
0%
1%
2%
3%
4%
5%
6%
FBiH RS
Public Security & Law Enforcement
(% GDP)
4,5% 4,5%3,9%
3,5%
0%
1%
2%
3%
4%
5%
6%
FBiH RS
2003 2006
Salaries in publicadministration
(% GDP)
16,0%
10,0%
12,3%
7,8%
0%
5%
10%
15%
20%
FBiH RS
12
DEFENSE EXPENDITURES AS % OF GDP
5,10%
3,00%
2,70%
2,50%
1,80%
1,80%
1,70%
1,70%
1,30%
1,10%
1,00%
0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00%
FBiH
Croatia
RS
Bulgaria
Czech Republic
Slovenia
Romania
Slovakia
Poland
Albania
Hungary
Source: SOR FBiH and RS 13
PUBLIC SECURITY EXPENDITURES AS% OF GDP
4,50%
4,50%
2,80%
2,10%
2,10%
2,10%
2,00%
1,80%
1,60%
1,60%
1,60%
0,00% 1,00% 2,00% 3,00% 4,00% 5,00%
FBiH
RS
Croatia
Albania
Bulgaria
Romania
Czech Republic
Poland
Hungary
Slovakia
Slovenia
Source: SOR FBiH and RS 14
PUBLIC EXPENDITURES REDUCTIONPLAN 2
Source: BiH Medium-Term Development Strategy - PRSP
Social Assistance (% GDP)
18,9%
14,7%13,5%
17,8%
0%
5%
10%
15%
20%
FBiH RS
Health Care (% GDP)
6,9%6,4%
6,7%
5,9%
0%
1%
2%
3%
4%
5%
6%
7%
FBiH RS
2003 2006
Education (% GDP)
6,8%
4,7% 4,5%
5,6%
0%
1%
2%
3%
4%
5%
6%
7%
FBiH RS
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Establishing of Indirect Taxation
Introduction of VAT;
Establishing of common framework of public procurements;
Reform of direct taxes;
Strengthening of budget planning system;
Strengthening of public revision system.
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Apart from rationalization of public expenditures, important areas of fiscal reform will be:
PROJECTION OF PUBLIC REVENUE GROWTH
2907
3023
3166
3312
3486
2600
2800
3000
3200
3400
3600
2003 2004 2005 2006 2007
in m
illio
n €
Source: Mid-Term Development Strategy BiH - PRSP 17
CURRENT ACCOUNT BALANCE PROJECTIONS
-17,7%
-15,6% -15,0%-13,6%
-11,3%
-20,0%
-15,0%
-10,0%
-5,0%
0,0%
2003 2004 2005 2006 2007
in %
GD
P
Source: BiH Medium Term Development Strategy - PRSP 18
INCREASE EXPORTS – REDUCE IMPORTS
13,0%14,0%
15,0%
12,0%
5,4%6,5% 6,5%
22,0%
0%
5%
10%
15%
20%
25%
2004 2005 2006 2007
%
Exports Imports
Source: BiH Medium-Term Development Strategy - PRSP 19
PRIVATE SAVINGS GROWTH PROJECTION
0,5% 0,3%
3,5%
5,0%
7,0%
0%
2%
4%
6%
8%
2003 2004 2005 2006 2007
Source: BiH Medium-Term Development Strategy - PRSP 20
FDI PROJECTION GROWTH
342
453
577
716
0
100
200
300
400
500
600
700
800
2004 2005 2006 2007
in $
mill
ion
Source: Mid-Term Development Strategy BiH - PRSP 21
PRIVATE INVESTMENT PROJECTION
15,5%16,3% 16,9% 17,2%
0,0%
5,0%
10,0%
15,0%
20,0%
2004 2005 2006 2007
% o
f G
DP
Source: BiH Medium Term Development Strategy - PRSP 22
REDUCTION OF PUBLIC DEBT
59,7%56,2%
52,5%48,5%
0,0%
20,0%
40,0%
60,0%
80,0%
100,0%
2004 2005 2006 2007
% o
f G
DP
Source: BiH Medium Term Development Strategy - PRSP 23
EXTERNAL DEBT SERVICING PROJECTIONS
8,6%
7,2% 7,0%
6,1%
4,4%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
2003 2004 2005 2006 2007
% o
f G
DP
Source: BiH Medium Term Development Strategy - PRSP 24
Realization of Medium Term Development Strategy is underway.
The implementation rate of the planned measures to date is around 84 percent
Positive trends in terms of inflow of foreign investments greater than expected, high levels of exports, higher level of lending to corporates, give reasons for optimism that in this year planned economic growth rates will be achieved.
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In order to realize goals from Miedium Term Development Strategy of BiH (PRSP), it will be necessary for the period of 2004-2007 to get around €1.2 billion of foreign aid in form of favorable credits and grants.
The largest part of this aid would be used for realization of BiH Public Investment Program, which will be presented to you tomorrow, as well as for realization of structural reforms in the area of:
Corporate restructuring
Public administration
External financing gap will be presented by the end of the conference.
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