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Dirk Reinermann, Country Manager World Bank Sarajevo

The Economist’s Second Roundtable with the Governments of BiH Sarajevo , September 23, 2003 When will Bosnia and Herzegovina be self -sustainable?. Dirk Reinermann, Country Manager World Bank Sarajevo. Overview.

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Dirk Reinermann, Country Manager World Bank Sarajevo

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  1. The Economist’s Second Roundtable with the Governments of BiH Sarajevo, September 23, 2003When will Bosnia and Herzegovina be self-sustainable? Dirk Reinermann, Country Manager World Bank Sarajevo

  2. Overview • Progress in the post-war reconstruction period (1995 – 2003): a lot has been achieved • Strategic objective: Transition from aid dependence to private sector led growth– what does it entail? • Challenges: What further reforms are needed to reach self-sustainability?

  3. Self-sustainability –a definition • Reduce external vulnerability • prudent debt management and creditworthiness • drastic adjustment in the current account deficit • Less reliance on public sector financing • Foreign aid • Government spending • attracting FDI • Institutional self-sustainability • more ownership over policy-making process: PRSP

  4. Post-war period achievements: macroeconomic performance

  5. Recent Achievements • Macroeconomic achievements: • inflation reduced to Euro Area level(0.3% in 2002) • large increase in official reserves(2.1 months of imports at end 2000, 4.2 at end 2002) • major fiscal consolidation in 2001 and 2002 (Fiscal deficit reduced by more than 50%) • Other achievements: • post-war infrastructure reconstruction mostly completed • return of refugees and IDPs

  6. Period ahead: medium-term development perspective Move from aid-dependency onto a path of self-sustained growth, spurred by an export-oriented private sector, and leading to job creation, improved living standards and EU integration

  7. Reform scenario • Preserve and strengthen macroeconomic stability • Improve the climate for investment and exports • Reduce excessive government consumption and provide more cost-effective public services to citizens and businesses

  8. The medium-term growth scenario

  9. BIH: Key Macroeconomic Challenges

  10. Medium-term macroeconomic challenges: • Reduce the current account deficit by increasing exports • Achieve fiscal sustainability by reducing non-developmental spending and the size of government, and increasing government efficiency • Address the issue of domestic debt and claims (currently at 50% of GDP): payment arrears, frozen currency deposits, war-related claims Manage fiscal adjustment rather than be subjected to it approach budget preparation strategically: MTEF, PRSP

  11. Recent FDI trends in transition countries Net FDI flows as percentage of GDP

  12. Privatizations: the current track recordthe latest available data Source: RS Directorate for privatization, FBIH Privatization Agency

  13. Generating higher public savings: medium-term fiscal adjustment (% of GDP)

  14. Short-term priorities for structural reforms • Improve business environment– enable easy exit, and entry of new investments (both foreign and domestic) • Speed-up privatization • Adopt and implement public procurement legislation • Rationalize budget spending (starting with the 2004 budget) • Reduce public sectorwage bill • Restructure social transfers (streamlining ofveterans’ benefits)

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