SARAJEVO – Representatives of the European Commission and of Bosnia and Herzegovina met on 25-26 January 2017 in Sarajevo for the 1st Sub-committee meeting on Economic and Financial issues and Statistics held under the Stabilisation and Association Agreement, announced the Delegation of the EU to BiH.
During a constructive and fruitful discussion, the European Commission and the authorities of Bosnia and Herzegovina reported on the economic and fiscal situation of the country, and the following points were discussed:
• In an introductory statement, the European Commission pointed to key challenges facing the country, such as high unemployment and low investment, which are linked to a weak business environment. The Commission also noted the positive growth in the economy together with some improvements in the labour market and the stability of public finances. Nevertheless, it also observed that the country develops clearly below its potential and that sustained reform measures are necessary to significantly improve the living standards of the people of Bosnia and Herzegovina. Improving the efficiency of public administration, increasing public investment and strengthening the business environment were underlined as some of the key reform areas. Better coordination among all stakeholders is also necessary for a successful reform implementation.
• Concerning requirements for meeting the economic criteria for joining the EU, the European Commission underlined that with respect to the first criterion, the functioning market economy criterion, the aspect of “functioning” is of crucial importance. This implies that not only the adoption of the necessary legislation is relevant, but – even more importantly – the full implementation of reforms and the existence of functioning institutions are necessary, which should support macroeconomic stability and an efficient allocation of resources by well-functioning markets.
• With regard to Public Financial Management and Public Internal Financial Control, the European Commission positively noted the adoption of a PFM strategy at state level and urged Bosnia and Herzegovina to share the draft country-wide strategy after consolidation with entity strategies and before adoption. The Commission also positively noted that PIFC is included in the Reform Agenda and that the basic legal provisions are in place. At the same time, the Commission underlined the need for strong political leadership and support from top management, the need for coordination within the Ministries of Finance at all levels, with the PAR department and with the government secretariats, and the need for well-developed coordination with the ongoing PFM and public administration reforms. Efforts should be made to ensure appropriate staffing levels. In the area of External Audit, the lack of Constitutional anchoring of financial and organisational independence of the Supreme Audit Institutions remains a concern.
• Concerning statistics, the European Commission positively noted the completion and publication of the population and housing census, an important achievement. The results can now be used for further statistical development. The Commission also pointed to the importance of further upgrading the countries’ statistical system towards full compliance with EU standards, and underlined the need to aggregate and consolidate lower level statistics to country-wide data sets. At the same time, the Commission acknowledged the tension between capacity constraints of the statistical offices and the increasing demand for statistics, also as BiH further progresses on the path toward EU Membership.
These issues will also be covered in detail in the next Economic Reform Programme of Bosnia and Herzegovina which will be discussed with the European Commission and the EU Member States.