Brussels/Sarajevo – The 5th Subcommittee meeting on Economic and Financial Issues and Statistics between EU and Bosnia and Herzegovina took place on 19-20 November. The meeting was co-chaired for BiH by Ms Vera Letica, Assistant Minister at the BiH Ministry of Finance and Treasury and by Mr Uwe Stamm, Head of Unit in the Directorate General for Economic and Financial Affairs of the European Commission.
The subcommittee took stock of the most important economic developments and reforms over of the past year, including the impact of the Covid-19 pandemic. Participants discussed macroeconomic stability, fiscal policy, the functioning of the market economy, competitiveness and productivity of the economy, public internal financial control and statistics. The spread of the COVID-19 and global economic downturn are expected to have a negative impact on the socio-economic situation of the country. In these difficult times, the EU remains firmly engaged in assisting Bosnia and Herzegovina in addressing the social and economic impact resulting from the pandemic. This assistance includes up to EUR 250 million of macro-financial assistance in the form of a loan to cover the increased external and budgetary financing needs.
The quality of economic governance suffers from insufficient cooperation at entity and state levels. The Commission recalled that a poor business environment, low investments, significant weaknesses in the country’s labor market and education system, a low quality of fiscal governance, a high influence of the state on the economy, a weak rule of law and a lack of innovation continue to be impediments for long-term growth and convergence. The Commission highlighted the strong need for effective and well-coordinated structural reforms as structural weaknesses have been exacerbated by the Covid-19 pandemic. The Commission recalled that the quality of fiscal governance has remained low, with a lack of medium-term planning, spending inefficiencies (including in the public health sector) and a strong focus on maintaining current spending patterns, in particular on public sector wages and social transfers, while neglecting necessary public investments. The Commission welcomed that the currency board arrangement has supported stability.
The government’s coordinated policy response will be critical to shape the economy in the post crisis context. The Commission encouraged Bosnia and Herzegovina to fully implement the policy guidance set out in the Joint Conclusions of the Economic and Financial Dialogue and to ensure consistent political support, high visibility, countrywide ownership and coherence of the Economic Reform Programme.
The Commission encouraged BiH to adopt a comprehensive common framework on public internal financial control and managerial accountability. On statistics, the Commission reiterated that Bosnia and Herzegovina should improve the provision of timely and exhaustive statistics in compliance with EU standards.