Transcript Public Investment Programme of BiH

PUBLIC EXPENDITURE MANAGEMENT CHALLENGES
IN ECA/PRSP COUNTRIES
BOSNIA’S REFORM EXPERIENCE TO
DATE
Ljerka Marić, Minster of Finance and Treasury - BiH
International conference on Strenghtening Public Expenditure Management
Warsaw, Poland, February 6- 9, 2005.
 In the first half of this year BiH Council of Ministers together
with FBiH Government and RS Government adopted Mid-Term
Development Strategy BiH (PRSP) for period 2004-2007. It is a
first strategic document agreed and approved by the BiH
authorities without involvement of the international community.
 Prior to the approval of the PRSP, wide consultation process
was organized with participation of NGOs, youth, private sector,
trade unions, academics, donors, and ordinary citizens.
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BASIC GOALS OF MEDIUM-TERM
DEVELOPMENT STRATEGY ARE:
 by end – 2007, achieve 70% of GDP from 1991
 by end – 2007, restore a partial creditworthiness on the
international capital markets
 create economic preconditions for faster integration of BiH
into EU
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CRITERIONS FOR SUCCESS OF MEDIUM
TERM DEVELOPMENT STRATEGY (PRSP)
ARE DEFINED AS:
 Reduction of unemployment rate by 20% relative to the
current unemployment rate
 Reduction of poverty rate by 20% relative to the current
poverty rate
 Signing Stabilization and Association Agreement with the
EU
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IMPLEMENTATION OF MEDIUM TERM
DEVELOPMENT STRATEGY REQUIRES
REALIZATION OF THE FOLLOWING
PRIORITIES:
 Preservation of macro-economic stability;
 Implementation of fiscal reform;
 Faster growth of private sector;
 Implementation of anti-corruption strategy;
 Strengthening of financial sector;
 Implementation of labor market reforms;
 Implementation of public administration reform;
 Implementation of several sectoral reforms, among them the most
important being:
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 Liberalization of electricity market
 To continue liberalization of telecom market
 To implement reform of higher education
 To implement reform of health system financing
 To establish adequate system of social protection
 To start reform of pension system
 To adopt and implement new legal and institutional framework for forestry
management
 To provide adequate support for agricultural production
 To define industrial policy of the country
 To introduce system of electronic relations with citizens (e-government)
 To implement National Environment Protection Plan
 To improve road construction management and road maintenance
management
 To continue reconstruction of railways
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REAL GDP GROWTH TARGETS
6%
5,5%
5,5%
5,5%
5,5%
2004
2005
2006
2007
4,0%
4%
2%
0%
2003
Source: BiH Medium-Term Development Strategy - PRSP
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CPI PROJECTION
3,0%
2,5%
2,2%
2,0%
2,0%
1,8%
1,5%
1,0%
0,9%
0,5%
0,0%
2004
2005
Source: BiH Medium-Term Development Strategy - PRSP
2006
2007
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FISCAL DEFICIT PROJECTIONS
0,5%
0,4%
0,0%
-0,1%
-0,5%
-0,6%
-0,7%
-0,8%
-1,0%
2003
2004
Source: BiH Medium Term Development Strategy - PRSP
2005
2006
2007
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REDUCTION OF PUBLIC EXPENDITURE
SHARE OF GDP
80
60
%
50,4%
40
31,4%
35,6%
36,6%
Romania
FYRoM
41,9%
42,6%
43,6%
43,8%
Bulgaria
Poland
Slovenia
Czech
Rep.
20
0
Albania
Source: BiH Medium-Term Development Strategy – PRSP (Data for 2002)
BiH
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PUBLIC EXPENDITURE PROJECTIONS
49%
47%
46,3%
46,0%
45,4%
in % GDP
45%
44,3%
43,1%
43%
41%
39%
37%
35%
2003
2004
Source: BiH Medium Term Development Strategy - PRSP
2005
2006
2007
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PUBLIC EXPENDITURES REDUCTION
PLAN 1
20%
Public Security & Law
Enforcement
(% GDP)
Salaries in public
administration
(% GDP)
Defense
(%GDP)
6%
6%
16,0%
5%
15%
12,3%
5,1%
4,5%
4,5%
5%
3,9%
4%
3,5%
4%
10,0%
10%
7,8%
3%
3%
2%
2%
1%
1%
0%
0%
2,7%
2,3%
1,9%
5%
0%
FBiH
RS
FBiH
2003
Source: BiH Medium-Term Development Strategy - PRSP
RS
FBiH
RS
2006
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DEFENSE EXPENDITURES AS % OF GDP
Hungary
Albania
1,00%
1,10%
Poland
1,30%
Slovakia
1,70%
Romania
1,70%
Slovenia
1,80%
Czech Republic
1,80%
2,50%
Bulgaria
2,70%
RS
3,00%
Croatia
5,10%
FBiH
0,00%
Source: SOR FBiH and RS
1,00%
2,00%
3,00%
4,00%
5,00%
6,00%
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PUBLIC SECURITY EXPENDITURES AS
% OF GDP
Slovenia
1,60%
Slovakia
1,60%
Hungary
1,60%
1,80%
Poland
2,00%
Czech Republic
Romania
2,10%
Bulgaria
2,10%
Albania
2,10%
2,80%
Croatia
RS
4,50%
FBiH
4,50%
0,00%
Source: SOR FBiH and RS
1,00%
2,00%
3,00%
4,00%
5,00%
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PUBLIC EXPENDITURES REDUCTION
PLAN 2
Health Care (% GDP)
Education (% GDP)
7%
6%
6,8%
7%
5,6%
6%
4,7% 4,5%
5%
6,4%
18,9%
17,8%
5,9%
14,7%
13,5%
5%
4%
3%
3%
2%
2%
1%
1%
0%
0%
RS
20%
15%
4%
FBiH
6,9% 6,7%
Social Assistance
(% GDP)
10%
5%
0%
FBiH
2003
Source: BiH Medium-Term Development Strategy - PRSP
RS
FBiH
RS
2006
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Apart from rationalization of public
expenditures, important areas of fiscal
reform will be:
 Establishing of Indirect Taxation
 Introduction of VAT;
 Establishing of common framework of public procurements;
 Reform of direct taxes;
 Strengthening of budget planning system;
 Strengthening of public revision system.
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PROJECTION OF PUBLIC REVENUE
GROWTH
3600
3486
in million €
3400
3312
3166
3200
3023
3000
2907
2800
2600
2003
2004
Source: Mid-Term Development Strategy BiH - PRSP
2005
2006
2007
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CURRENT ACCOUNT BALANCE
PROJECTIONS
0,0%
in % GDP
-5,0%
-10,0%
-11,3%
-13,6%
-15,0%
-15,6%
-15,0%
-17,7%
-20,0%
2003
2004
Source: BiH Medium Term Development Strategy - PRSP
2005
2006
2007
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INCREASE EXPORTS – REDUCE IMPORTS
25%
22,0%
20%
15%
%
12,0%
15,0%
14,0%
13,0%
10%
6,5%
5,4%
6,5%
5%
0%
2004
2005
Exports
2006
2007
Imports
Source: BiH Medium-Term Development Strategy - PRSP
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PRIVATE SAVINGS GROWTH PROJECTION
8%
7,0%
6%
5,0%
4%
3,5%
2%
0,5%
0,3%
2003
2004
0%
Source: BiH Medium-Term Development Strategy - PRSP
2005
2006
2007
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FDI PROJECTION GROWTH
800
716
700
577
in $ million
600
500
400
453
342
300
200
100
0
2004
2005
Source: Mid-Term Development Strategy BiH - PRSP
2006
2007
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PRIVATE INVESTMENT PROJECTION
20,0%
15,5%
16,3%
16,9%
17,2%
2006
2007
% of GDP
15,0%
10,0%
5,0%
0,0%
2004
2005
Source: BiH Medium Term Development Strategy - PRSP
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REDUCTION OF PUBLIC DEBT
100,0%
% of GDP
80,0%
60,0%
59,7%
56,2%
52,5%
48,5%
40,0%
20,0%
0,0%
2004
2005
Source: BiH Medium Term Development Strategy - PRSP
2006
2007
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EXTERNAL DEBT SERVICING
PROJECTIONS
10,0%
8,6%
8,0%
7,2%
7,0%
% of GDP
6,1%
6,0%
4,4%
4,0%
2,0%
0,0%
2003
2004
Source: BiH Medium Term Development Strategy - PRSP
2005
2006
2007
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 Realization of Medium Term Development Strategy is
underway.
 The implementation rate of the planned measures to date is
around 84 percent
 Positive trends in terms of inflow of foreign investments
greater than expected, high levels of exports, higher level of
lending to corporates, give reasons for optimism that in this
year planned economic growth rates will be achieved.
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 In order to realize goals from Miedium Term Development
Strategy of BiH (PRSP), it will be necessary for the
period of 2004-2007 to get around €1.5 billion of foreign
aid in form of favorable credits and grants.
 The largest part of this aid would be used for realization
of BiH Public Investment Program, which will be
presented to you tomorrow, as well as for realization of
structural reforms in the area of:
 Corporate restructuring
 Public administration
 External financing gap will be presented by the end of the
conference.
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