"Standard in Republika Srpska is rising, the economy is booming, the economy is on the rise, there are fewer unemployed… and in order to function even more efficiently, this BiH entity needs to regain lost competencies" - at least that is what SNSD leader and BiH Presidency member Milorad Dodik and RS Finance Minister Zora Vidović represent.
But the reality is much different: Republika Srpska is in debt and financially unable to bear the separation from BiH. Given US sanctions against Dodik, the situation could be even worse.
Maximum long-term debt up to 611 million KM
According to the latest published official data, the total debt of this BiH entity on September 30, 2021, amounted to 6.093 billion KM or 52.5 per cent of GDP, while the debt of the FBiH in the same period amounted to 5,969,964,899 KM (data from the 287th session of the FBiH Government).
Thus, the RS is twice as indebted per capita as the FBiH, which has a larger population.
Although burdened with old debts, the Government of RS is planning new debts in the total amount of 1.5 billion KM this year as well.
The decision of the RS National Assembly from December last year defined that RS should borrow a maximum of 611 million KM in the long run, through bond issues on the domestic and international financial markets, and loans from international creditors and foreign governments. For short-term debt, it is planned to issue a total of 40 million KM of six-month treasury bills in January and February in the amount of 20 million KM.
They also planned an additional burden - issuing guarantees of up to 700 million KM.
While economic experts warn that new debts could lead to economic collapse, Minister Zora Vidović does not share their opinion. Her view is that RS is not over-indebted, explaining that "the total debt is 53.10 per cent of the gross domestic product".
"RS's public debt is 43.8 per cent of gross domestic product, while the average borrowing interest rate is 2.15 per cent," Vidovic said from a speech at the last NSRS meeting held on December 15. In statements for some media from RS, she praised the rise of the economy, and announced the growth of GDP: "We believe that this is realistic, and the budget remains liquid and all obligations will be settled."
They repay the old debt with a new debt
Economic analyst Zoran Pavlović notes that there is not enough information about the structure and purpose of the planned debts:
“We are practically trying to repay the old debt with a new debt, which is not a plan that should work. It is unclear to me how it is possible that last year reprograms were carried out with the aim of spending more income than planned, and in the whole story we have such indebtedness that debts are not being repaid.”
He added that the basic problem is that we do not have precise information on the state of debt and indebtedness of RS. He claims that the RS Government has made such a mechanism for itself that it is not under the control of the RS Assembly, which would sometimes have to approve new loans, but that is only the law on borrowing and budget, and defined frameworks for that year.
"Personally, I think that it is not good to go on new debts unless it is for servicing the obligations that are coming", concludes Pavlović.
Dodik's "hollow" promises
However, the whole story about the new debts in RS is overshadowed by the increasingly difficult situation in BiH, Dodik's constant announcements about the separation of RS from BiH, and the increasingly frequent "rattle of weapons". The RS government is persistently turning a blind eye to the mass exodus that has engulfed the RS, and no one is mentioning how to prevent it. At the same time, Dodik mentions every day the transfer of competencies, and the establishment of the army, police agencies, judicial institutions, indirect taxation administration, CRA… He promised, for about 7,000 RS citizens employed in institutions at the BiH level, employment in institutions and organizations in RS.
Pavlović and economist Svetlana Cenić told Žurnal last year that "there is no money for that".
“Their budget hole is already a billion, roughly. Those 7,000 are unproductive and they need to be supported by a weak economy now? That is out of the question, because the budget of Republika Srpska, neither rebalanced nor in any way, cannot withstand nor is it foreseen", warned Cenić.
Pavlović stated that the public administration is certainly already enormously large with poor work results.
Dodik's last year's promises collide with the announcements of his minister Vidović that "RS is reducing the public sector to the most optimal measure and that new employments have been stopped".
In the report of BNTV from December 2021, it is mentioned that statistical data show that 2,232 employees in the public administration were laid off last year and that workers and experts warn that the level of public spending cannot be sustained by the economy.
They did not plan funds for institutions to which they want to regain jurisdiction
Let us remind you that the budget for 2022 was adopted in December and amounts to 4.024 billion KM and is eight million KM higher than last year. However, the budget does not provide funds for financing institutions which, according to Dodik's announcements, should be transferred to the RS.
The Minister of Finance stated that they "left certain reserves in certain positions" if certain things were to happen. Although Zora Vidović claims that "from the aspect of the relevant ministry, a plan has already been devised to establish the administration of Srpska for indirect taxation in accordance with the return of competencies," experts believe that this is economically unfeasible.
The representatives of the International Monetary Fund (IMF) are also worried about Dodik's rhetoric and the collapse of the work of the UIOBiH, as evidenced by the letter they sent to seven addresses in BiH in December.
They are interested in who will service the debt. Not only the one from RS but also from FBiH.