1. BOSNIA’S REFORM EXPERIENCE TO DATE
PUBLIC EXPENDITURE MANAGEMENT CHALLENGES
IN ECA/PRSP COUNTRIES
BOSNIA’S REFORM EXPERIENCE TO DATE
Ljerka Marić, Minster of Finance and Treasury - BiH
International conference on Strenghtening Public Expenditure Management
Warsaw, Poland, February 6- 9, 2005.

2. 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 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. 2

3. BASIC GOALS OF MEDIUM-TERM DEVELOPMENT STRATEGY ARE:
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 3

4. CRITERIONS FOR SUCCESS OF MEDIUM TERM DEVELOPMENT STRATEGY (PRSP) ARE DEFINED AS:
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 4

5. IMPLEMENTATION OF MEDIUM TERM DEVELOPMENT STRATEGY REQUIRES REALIZATION OF THE FOLLOWING PRIORITIES:
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: 5

6. 6 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

7. REAL GDP GROWTH TARGETS7
Source: BiH Medium-Term Development Strategy - PRSP

8. CPI PROJECTION 8
Source: BiH Medium-Term Development Strategy - PRSP

9. FISCAL DEFICIT PROJECTIONS9
Source: BiH Medium Term Development Strategy - PRSP

10. REDUCTION OF PUBLIC EXPENDITURE SHARE OF GDP10
Source: BiH Medium-Term Development Strategy – PRSP (Data for 2002)

11. PUBLIC EXPENDITURE PROJECTIONS11
Source: BiH Medium Term Development Strategy - PRSP

12. PUBLIC EXPENDITURES REDUCTION PLAN 112
Source: BiH Medium-Term Development Strategy - PRSP

13. DEFENSE EXPENDITURES AS % OF GDP13
Source: SOR FBiH and RS

14. PUBLIC SECURITY EXPENDITURES AS % OF GDP14
Source: SOR FBiH and RS

15. PUBLIC EXPENDITURES REDUCTION PLAN 215
Source: BiH Medium-Term Development Strategy - PRSP

16. Apart from rationalization of public expenditures, important areas of fiscal reform will be:
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. 16

17. PROJECTION OF PUBLIC REVENUE GROWTH17
Source: Mid-Term Development Strategy BiH - PRSP

18. CURRENT ACCOUNT BALANCE PROJECTIONS18
Source: BiH Medium Term Development Strategy - PRSP

19. INCREASE EXPORTS – REDUCE IMPORTS19
Source: BiH Medium-Term Development Strategy - PRSP

20. PRIVATE SAVINGS GROWTH PROJECTION20
Source: BiH Medium-Term Development Strategy - PRSP

21. FDI PROJECTION GROWTH 21
Source: Mid-Term Development Strategy BiH - PRSP

22. PRIVATE INVESTMENT PROJECTION22
Source: BiH Medium Term Development Strategy - PRSP

23. REDUCTION OF PUBLIC DEBT23
Source: BiH Medium Term Development Strategy - PRSP

24. EXTERNAL DEBT SERVICING PROJECTIONS24
Source: BiH Medium Term Development Strategy - PRSP

25. 25 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. 25

26. In order to realize goals from Miedium Term Development Strategy of BiH (PRSP), it will be necessary for the period of to get around €1.5 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. 26