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World Bank Suggests Reforms to Improve Bosnia and Herzegovina's Public Expenditure and Revenue System

February 28, 2011

In the short and medium term it is important to address the fiscal constraints and the need to continue to ensure fiscal stability in 2012 and beyond with the objective of having a balanced budget by 2015

SARAJEVO, February 28, 2011 – Public expenditure reforms remain a high priority for Bosnia and Herzegovina (BH), especially in the context of the post-2008/2009 crisis and recovery, according to the new World Bank Public Expenditure and Institutional Review (PEIR) for Bosnia and Herzegovina, released today.

PEIR is a systematic analysis of the efficiency and effectiveness of public spending in order to provide recommendations for potential policy and administrative changes. This edition of the PEIR has identified four broad recommendations that BH faces in improving its public expenditure and revenue system:

  1. reshape public expenditures (which at present are excessively concentrated on current spending including wages, pensions and social transfers);
  2. improve the structure of the revenue system;
  3. reverse the excessive growth of the public sector; and
  4. complete the overall fiscal architecture in the country by strengthening the BH Fiscal Council.

The World Bank is not only about financing. It is also about knowledge services and analytical work”, says Anabela Abreu, World Bank Country Manager for Bosnia and Herzegovina. “The PEIR is an important assessment of the public sector in the country, and we hope that it will serve as a basis for a dialogue with the BH counterparts. We are looking forward to discussing the PEIR recommendations with the BH authorities”.

The PEIR also analyzes the overall fiscal developments as well as wages in the public sector, social assistance, pensions, health, education, forestry and energy. It offers detailed, short- and long-term recommendations for improvements.

Reforms suggested in this report will help reduce the overall size of the public sector which is currently too large, improve the efficiency of public service delivery and the efficiency of the revenue system, and reduce financing pressures which in the current international environment are constraining”, said Ron Hood, World Bank Lead Economist for the Western Balkans and the primary author of the report. Ultimately, if undertaken, these reforms would allow for more effective public spending and better protection of the most vulnerable.

The last Public Expenditure and Institutional Review for BH was conducted in 2006.

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