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Debt and Fiscal Management IN REPUBLIKA SRPSKA
Biljana Bogićević │[email protected] Srpska
Ministry of Finance │www.vladars.net
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PRESENTATION OUTLINE
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Institutional arrangements
Framework for subnational debt management
Choices and constraints in subnational borrowing
Debt management coordination
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44 75 N, 17 25 E
Southeast Europe - bordering Croatia, Serbia, and Montenegro
Area: 25053 sq km (49% of BiH)
Population: 1,3 million (34% of BiH)
Currency: Convertible Mark (BAM)
GDP: USD 5.9 billion
GDP per capita: USD 4,171
Administrative center: City of Banjaluka
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INSTITUTIONAL ARRANGMENTS
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POLITICAL STRUCTURE
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BH TRIPARTITE PRESIDENCY
Member Chairman Member
BH COUNCIL OF MINISTERS
Chairman
Foreign
Affairs
Finance &
Treasury
Civil
Affairs
HRs &
Refugees
Communication
& Transport
Foreign Trade &
Economic Relations
Security Defense Justice
NominatesApproves
BH PARLIAMENTARY
ASSEMBLEY
HOUSE OF
PEOPLES
HOUSE OF
REPRESENTATIVE
S
Delegated by FBH
House of Peoples
(Croats & Bosniaks) &
RS National Assembly
(Serbs)
HEALTH&SOCIAL
PROTECTION
64 Municipalities
RS GOVERNMENT
(8 Serb-, 5 Bosniak- & 3
Croat-ministers)
M
I
N
I
S
T
R
I
E
S
FINANCE
INTERIOR
JUSTICE
ENERGY, MINING & INDUSTRY
TRANSPORT &
COMMUNICATIONS
LABOR & VETERAN-DISABLED
PROTECTION
ADMINISTRAT. & LOCAL SELF-
GOVERNANCE
EDUCATION & CULTURE
SCIENCE & TECHNOLOGY
ECONOMIC RELATIONS &
REGIONAL COOPERATION
REFUGEES & DISPLACED
PERSONS
PRIME MINISTER
10 Cantonal governments
79 Municipalities
FBH GOVERNMENT
(8 Bosniak-, 5 Croat- & 3
Serb-ministers)
M
I
N
I
S
T
R
I
E
S
FINANCE
INTERIOR
JUSTICE
ENERGY, MINING &
INDUSTRY
TRANSPORT &
COMMUNICATIONS
LABOR & SOCIAL POLICY
DISPLACED PERSONS &
REFUGEES
ISSUES OF VETERANS
HEALTH
EDUCATION & SCIENCE
CULTURE & SPORTS
TRADE
PRIME MINISTER
RS TRIPARTITE
PRESIDENCY
FBH TRIPARTITE
PRESIDENCY
FBH PARLIAMENT
HOUSE OF
PEOPLES
HOUSE OF
REPRESENTATIVE
S
ApprovesElects
Nominates
RS
NATIONAL
ASSEMBLEY
COUNCIL OF
PEOPLES
Nominates
Approves
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BH Fiscal Council:
+ 5 Members: 2 Observers:
Chairman of BH Council of Minister BH Central Bank Governor
Prime Ministers of RS and FBH Brcko District Mayor
Finance Ministers of BH, RS and FBH
Adopts: Global Framework of Fiscal Balance and Policies
Projected level of indirect tax revenues
Indirect tax revenue share of BH Institutions
Projected primary fiscal balances for BH Institutions, RS and
FBH
Upper borrowing limits for RS and FBH – as they are defined in
each government level’s legal framework
Mid-term budgets of BH Institutions, RS and FBH aligned with the
Global Framework
FISCAL COORDINATION MECHANISM
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FRAMEWORK FOR SUBNATIONAL DEBT MANAGEMENT
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Each level of government has a mandate to borrow
Each level of government has its own legal framework regulating
debt management:BiH Law on Debt Issuance, Debt and Guarantees
RS Law on Borrowing, Debt and Guarantees
FBiH Law on Debt, Borrowing and Guarantees
Legal frameworks set the borrowing limits for each government
level separately:
LEGAL FRAMEWORK
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Total debt 60% of GDP
Public debt 55% of GDP
Short-term debt 8% of the previous
year’s operating revenues
Guarantees 15% of GDP
RSDebt servicing 18% of the (for the existing previouspublic
debt and year’s consolidated public guarantees and
revenuespotential new debt and guarantees)
FBH- the law provision expired
- the threshold used to be regulated as in FBH
BH
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99% of borrowing is on the subnational level – the RS and FBH
level
Deficit happens at the entity and lower levels of government -
BH institutions’ budget always balanced
Entities in charge of main investment areas (transport, energy,
education, health, SSF, labor markets etc.)
Contracting debt:
External debt – 99% contracted through the BH Ministry of
Finance and Treasury and on-lent to the subnational levels
Internal debt - directly incurred only by the entities, cantons,
municipalities and District Brcko
Choices on financing instruments, lenders, and borrowing terms
made on the subnational levels
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CHARACTERISTICS OF BORROWING
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SUBNATIONAL BORROWING REGIME
• RS free to decide how much to borrow, from whom to borrow,
what instruments to choose, and on what to spend the borrowed
money
• Supported with self-imposed rule on outstanding debt
limits
• Preconditions: (1) free and open markets(2) information on
debt and debt repayment capacity available (3) no chance of
bailout
Market discipline
• High degree of external borrowing centralization with 99%
on-lending to RS and FBH
Administrative constraints
• Macroeconomic forecasts and resulting indirect tax revenues
jointly formulated
• Overall primary balance targets for each level of government
jointly agreed
• Specific debt limits calculated on the basis of self-imposed
rules
Cooperative arrangements
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CHOICES AND CONTRAINTS IN SUBNATIONAL BORROWING
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• Lenders:• banks (90%), insurance companies and
investment and pension funds
• Types: • Bank loans• T Bonds: 4, 5 7 years• T Bills: 3-, 6-,
9-, and 12-month
Domestic borrowing:
• Lenders:• IFIs and bilateral creditors
• Types:• long-term, concessional loans and credits
External borrowing:
CHOICE OF DEBT INSTRUMENTS
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CONSTRAINTS IN DEBT MANAGEMENT
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PORTFOLIO CONSTRAINTS LEGAL CONSTRAINTS
EXTERNAL BORROWING CONTRAINTS
INTERNAL BORROWING CONTRAINTS
Legally defined limits and procedures leave little room for
maneuver
Few external funding sources
Shallow domestic market
No access to international financial markets – small size of
possible future issuance
Fully dependent on IFIs lending Available financing amounts
limited Choice of borrowing purpose limited Budget financing
designed for a country as a
whole – triggers defined and must be met at each government
level for fund disbursements
Financing instruments characteristics mainly pre-defined by
creditor
Fragmented financial market with limited investors base
Commercial banks the biggest lender – mostly foreign owned with
strict exposure limits
Little secondary market trading
Borrowing from the CBBH not possible
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DEBT MANAGEMENT COORDINATION
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Exchange of information on debt:
BH Ministry of Finance and Treasury Central Bank of BH: External
debt
BH Ministry of Finance and Treasury (Disbursement advice) RS and
FBH ministries of finance (data on direct external debt, domestic
debt, cantonal governments’ debt, local governments’ debt and SSFs’
debt)
Joint BH Debt Management Strategy is being prepared with the
WBG’s technical assistance:
Joint macro framework
Joint portfolio indicators
3 preferred debt strategies - RS, FBH and Brcko District
Other deliverables of the WBG’s technical assistance:
Reform plans for RS DMD including RS Debt Management
Strategy
Reform plan for FBH DMD including FBH Debt Management
Strategy
COORDINATION AREAS
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QUESTIONS?
Biljana Bogićević│[email protected]
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Thank you!
