WASHINGTON, April 8, 2010 – The World Bank Board of Executive Directors today approved a Development Policy Operation (DPO) for Bosnia and Herzegovina (BH) in the amount of US$111 million. The program was prepared at the request of BH authorities to help mitigate the impact of the economic crisis. The program will provide budget support to accelerate the implementation of priority public expenditure reforms.
The approved DPO recognizes the efforts of the authorities in BH to make public spending sustainable, while protecting the most vulnerable citizens. The focus of the reforms supported by the DPO is to strengthen the targeting of a wide array of cash-transfer programs to families and individuals, to better reach the most vulnerable in BH.
“I wish to congratulate the authorities in Bosnia and Herzegovina for this very important milestone. The implementation of the reforms they approved will ensure continued support for the most vulnerable categories of the population and improved sustainability of public spending,” stated Jane Armitage, World Bank Country Director for BH. “The alternative would have been the drastic reduction of benefits for all, which would have mostly affected the ones whose existence truly depends on these benefits.”
The implementation of the ambitious legislative framework recently approved by the two BH Entities, will allow for the sustainable improvement of the equity of public spending for various social protection and war veterans programs, by ensuring that a larger share of available funds reaches the recipients who are most in need.
“These reforms were inevitable, and the economic crisis has only made them more urgent. BH spends the largest amounts in Europe on cash transfer programs, while reaching the lowest percentage of its citizens in need of assistance,” said Ronald Hood, World Bank Lead Economist for BH. “That is not only unsustainable and inefficient, but also unfair.”
The World Bank is fully committed to continuing to support the BH authorities with the implementation of these reforms. This DPO follows on the World Bank approval of a US$15 million project (Social Safety Net and Employment Support Project) in February to strengthen the institutional capacity necessary for implementation of the reforms, and to provide employment services to active job-seekers among vulnerable groups.
The approved US$111million DPO − the first phase of a public expenditure reform program supported by the World Bank − consists of an interest free IDA Credit of US$66 million equivalent and an IBRD Loan of US$45 million. The BH authorities decided to allocate the proceeds of the DPO among the two Entities in the following way: 60 percent for the Federation of BH and 40 percent for Republika Srpska. The World Bank portfolio of active projects in Bosnia and Herzegovina now includes 17 operations worth approximately US$ 466.4 million.