The Board of Directors of the World Bank approved the loan of IBRD for BiH in the amount of 74.50 million EUR (equivalent to 80.00 million USD) for the Operation for the development of policy for public finances. This program will secure budget support for the encouragement of the adoption of policies of the government in BiH, with the aim to improve public finances and reduce the fiscal pressures in the medium term.
BiH has one of the largest public sectors in the world in relation to its economy, where the general government expenditures make up for almost 44 % of GDP in 2016 and public enterprises are increasing the representation of public sector in the economy even more. There is plenty of space for adjusting the size and increase of effectiveness of the public sector. The operation for development policy of public finance provides support for measures for reducing of public spending by as much as 2.3 % of GDP in the medium term and lays foundations for structural reforms in the direction of a more effective public sector in the future.
Reform measures within this program are aimed at reducing rigidities of the labor market, the purchase of medicines, and pave the road for the coverage of overdue debts and deeper structural reforms in the management of public finances, financing of the health care sector and restructuring of state-owned enterprises. This program has a foundation in the Reform Agenda, which represents a comprehensive program of structural transformation and it is supported by all governments in BiH and all development partners, including the European Commission, the International Monetary Fund, and the World Bank.
“The approved program recognizes the efforts of authorities of BiH to reach more sustainable public spending in the medium term. Resolving issues of bulky and inefficient public sector is one of the most important aspects of the Reform Agenda, which is aimed to transform the economy in accordance with the criteria of the European Union and accelerate growth and opening of new workplaces,” said Ellen Goldstein, the Director of the World Bank for the Western Balkans.
The program is founded in the reforms that are foreseen under the section of the Reform Agenda that is related to public finance, which is aimed at ensuring fiscal sustainability in the atmosphere of recovery of economic growth. This is the central part of the Framework Partnership of the World Bank Group with BiH, which was approved in December 2015. The framework provides 750 million USD of new loans from the World Bank in the period 2016-2020, depending on the volume and flow of implementations of reforms.
The portfolio of active projects of the World Bank in BiH includes 11 operations worth around 497 million USD. Areas for which is provided support include transport, employment, energy efficiency, local infrastructure, environment, forestry and water management.