Bosnia and Herzegovina (BH) is an upper middle-income country which has accomplished a great deal since experiencing a war in the 1990s. Today, BH is a European Union (EU) potential candidate country moving toward alignment with the EU’s acquis requirements. Between 1998 and 2008 BH experienced strong growth, with Gross Domestic Product (GDP) increasing by over two thirds in real terms and poverty dropping from nearly 20% to around 14%. 

Despite this strong economic performance, the onset of the global financial crisis in late 2008 is having an ongoing negative impact on the country’s economy. The economy rebounded in 2011 - growing by 1% after a deep recession in 2009 caused GDP to contract by 2.9% - before returning to recession in 2012.  In 2013, the economy grew by an estimated 0.8% thanks mostly to increased exports. The World Bank forecasts a continued rebound in 2014, with an estimated growth rate of 2%. However, risks continue to tilt toward the downside. In particular, slower growth in the main Eurozone export markets, political and social turmoil, lack of progress in making improvements to the business climate (e.g. through streamlined regulations, trade procedures or lack of progress on transport links) could all reduce the economic growth rates. 

Significant progress in implementing structural reforms will be needed if the country is to achieve faster economic growth than what is currently foreseen. Strengthening public finance, improving the business environment in the country, and advancing the institutional and labor market reform agenda are among the areas where BH could make notable progress in fostering job creation and growth in the medium term.

Over the last four years, Bosnia and Herzegovina has been a “blend country” - utilizing resources from both the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD), as well as the Global Environmental Fund. As of fiscal year 2015, BH will graduate from IDA and will continue to use IBRD resources in support of its development priorities.

With BH now set on joining the European Union (EU), supporting the EU integration process has become the overarching theme of the World Bank’s Country Partnership Strategy (CPS), along with competitiveness, environmentally sustainable growth, and social inclusion.

The World Bank Group’s objective during the Fiscal Years 2012-15, according to the CPS, has been to support BH through knowledge services, targeted financing, coordination with European financial institutions, and an expanding partnership with the EU - including EU co-financing of World Bank-financed operations. This partnership is built on the three pillars of competitiveness, social inclusion and environmental sustainability.

Competitiveness: Interventions in this area include a Development Policy Operation (DPO) that support macroeconomic stability, investments in irrigation and land registration, and access to capital for small and medium enterprises. In addition, the International Financial Corporation (IFC) continues to also provide support to operations in the country through advisory services in the areas of regulatory reform and regulatory simplification, as well as investment policy work.

Social Inclusion: The existing portfolio supports improvements in living standard - including improvements in targeting social benefits, more effective job-brokerage services, expanded access to primary health care through family medicine, and improved access to basic public services.

Environmental Sustainability: BH is vulnerable to climate change. The Bank is supporting projects to help ensure the sustainable use of natural resources - especially in areas where BH is extravagantly endowed such as water and forestry - and to prepare for a growing risk of floods and droughts. Finally, the Bank recently approved an energy efficiency project which will improve the energy efficiency of public buildings such as schools and hospitals.

The current portfolio of Bank-supported operations in Bosnia and Herzegovina consists of 12 projects totaling about $454.6 million. Areas of support include agriculture and irrigation services, health and social protection, environment, local infrastructure and services, real estate registration, and support for small and medium enterprises, BH is also a member of the IFC, which has invested about $376.8 million since starting operations there in 1996. The IFC portfolio in BH is currently $124.7 million and focuses on improvements in the country’s investment climate, manufacturing, agribusiness, infrastructure, and climate change. IFC is also focusing its efforts in BH on supporting private sector participation in infrastructure development in roads, health, and renewable energy. 

Over the last 17 years, the World Bank Group has approved 70 projects in Bosnia and Herzegovina, totaling more than $1.7 billion. This assistance has included IDA Credits ($1.43 billion), IDA Grants ($25 million), Global Environment Facility (GEF) Grants ($23.9 million) and IBRD loans ($295 million). From 1996-2002 much of this work was geared toward post-conflict reconstruction, focusing on infrastructure, roads, energy, schools, and hospitals. Since that time, the partnership has expanded and focus areas now include: agriculture, environment, health, social safety and employment, local infrastructure and private sector development.

Some areas of development in Bosnia and Herzegovina include:

Agriculture: Although the share of agriculture in the BH economy has decreased to less than 10% over the last decade, the sector nonetheless remains important for employment and as a socioeconomic buffer. Approximately 20% of the population in BH is employed in this sector. Close proximity to the EU, a moderate climate, and abundant water resources give BH a comparative advantage in this sector, particularly for niche products. However, the country is not taking full advantage of this and it continues to struggle with EU standards. The World Bank Group is working with BH to strengthen the agencies for veterinary services, health and phytosanitary services, and food safety in the country. The Agriculture and Rural Development Project assists BH in strengthening its institutions to deliver more efficient and effective agricultural services and accelerate the country’s eligibility to access support under the EU Instrument for Pre-Accession Assistance for Rural Development (IPARD). In addition, the World Bank Group is also supporting the Irrigation Development Project which is financing the rehabilitation of irrigation infrastructure in both BH entities in some of the most productive agricultural areas of the country. The project finances primarily works but also provides support to the formation of Water User Associations where appropriate and develops the institutional set up to ensure adequate operations and maintenance and funding of the systems in a sustainable manner.

Environment: The World Bank portfolio in BH includes a number of projects that contribute to the environmentally sustainable use of natural resources. The portfolio has a strong drive toward improving management and the use of natural resources, and ensuring environmental sustainability through greener project implementation and cleaner production.  The Second Solid Waste Management Project helps establish new sanitary landfills and municipal waste management regions that are improving environmental management and the sustainability of previously common single-municipality dumpsites. Furthermore, municipal wastewater is one of the key pollutants in BH, and the World Bank is financing construction or reconstruction of nine wastewater treatment facilities through three different projects: the Sarajevo Wastewater Project, the Neretva and Trebisnjica Management Project, and the Water Quality Protection Project. It is important to note that prior to the interventions under these projects, only 5–6 percent of total municipal wastewater in the country was treated before being released into rivers, which further downstream are used for water supply, irrigation, and recreation.  It is estimated that following completion of the three projects on wastewater treatment plants at least 30% of the total municipal wastewater generated will be treated prior to release. The Bank will support sustainable forest and landscape management through the recently approved GEF project. Integrated river basin management approaches in line with the EU Directive will be addressed for the Neretva, Trebišnjica, and Drina rivers.

Health: Although BH authorities have implemented reforms to improve the health sector, the health system in the country remains very fragmented. Total expenditures in this sector have steadily increased and are now estimated at about 10.9 percent of GDP. The recent implementation of the family medical care model represents a major reform, with 75 percent of service users now expressing their satisfaction with this model. The World Bank Group has been working with BH to continue these reforms through the Health Sector Enhancement Project. As part of this project more than 1,100 practicing physicians and more than 1,580 nurses have completed a rigorous program to provide family medicine care. More than 600 physicians have also earned a Family Medicine Specialization. It is estimated that by the project’s completion in 2014 up to 70% of the population in BH will be covered by family medicine teams.

Private Sector Development: BH is hindered by one of the least friendly business environments in the region. The World Bank Group is responding to this situation in the country through the implementation of several programs designed to improve business environment and investment climate, and support private sector development in order to stimulate job creation in the country. The Enhancing Small and Medium Enterprises (SMEs) Access to Finance Project has so far supported 131 companies in accessing credit during this period of constraint. More than 4,000 jobs have been saved and 1,120 new jobs have been created by this project.

Augmenting this work is the Social Safety Nets and Employment Support Project, which is helping to improve the quality of data needed for policy-making purposes and to improve the targeting of social benefits in the country. The project also supported job-brokerage services and has achieved the objective of extending job-brokerage services to 10,000 active job seekers among hard-to-employ categories (disabled, long-term unemployed, veterans, youth etc…).


Bosnia and Herzegovina: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments