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Thesis:
During the first years of the new millennium, macroeconomic indicators in countries of
southeast Europe on average largely resembled those of EU countries and developed
economies. With the onset of the global economic and financial crisis in 2008, the situation
started changing dramatically. That is the period of widening income inequality in most
European countries, which is primarily linked to factors lying behind the crisis. While the
effects of the crisis on developed economies have been explored relatively more, the effects
on developing countries, and more specifically southeast European (SEE) countries1 are less
known. When it comes to Bosnia and Herzegovina, one of the most problematic issues are:
public spending, health and pension systems, and education.
1. Trkić-Izmirlija Naida, Efendić Adnan, ''Effects of the Global Economic Crisis and
Public Spending on Income Distribution in Bosnia and Herzegovina'', 29 Nov. 2015.
Web.
In line with existing research and theory, we expect the crisis to affect structure and
magnitude of public spending, which should in turn affect income distribution. However,
testing this assumption in the BiH context is not simple. Reliable figures about public
spending in BiH, and especially consolidated in a reasonable way and based on a
methodology consistent throughout time, unfortunately do not exist. Each of the fourteen 11 |
P a g e governments in BiH4 and almost 150 local self-governance units (municipalities) plan,
execute, manage, record and report their expenditures rather independently. Accordingly,
efforts to introduce unified and systematic expenditure reporting that would allow
consolidation which is necessary to provide an answer to questions such as “How much
public money was spent overall?” or “How much of that amount was spent on education,
social protection or health?” had only limited success.
The Bosnia and Herzegovina (BH) pension system currently consists of two pension
funds, each functioning in one o f the two entities making up Bosnia and Herzegovina, the
Federation (FBiH) and Republika Srpska (RS). Both pension systems have already
undertaken substantial reforms supported by the World Bank. However, critical problems still
exist in both systems and will only worsen with time. This note provides an evaluation of the
current system and provides some possible reform options. The note is organized as follows:
Section 2 contains a brief overview of the historical development of the pension systems,
Section 3 contains a brief overview of the current demographics and financial status of the
pension funds, Section 4 provides a detailed review of the pension system design parameters
in each system, providing international comparisons, Section 5 provides projections of the
financial and social consequences of today's parameters, Section 6 provides some reform
options which harmonize parameters across the two entities and remove the most obvious
disincentives in the current systems, Section 7 provides a longer run view on options for
dealing with declining pension coverage among the elderly, and Section 8 concludes.
The intellectual reconstruction of the school system is far more challenging than the mere
reconstruction of buildings. The International Community cannot do this alone, but it also
cannot allow politicians to take the children of this country hostage to a narrow, nationalistic
agenda.