Bosnians to be Hit Hard by Response to Financial Crisis as Price Rises and Tax Hikes Eat Away at Meager Salaries

Bosnian officials are keen to impress upon the public that the financial crisis is in receding; however, statistics tell a different story for 2011 – a new year that is likely to be a more financially trying one for the citizens of Bosnia-Herzegovina. As of first day of the year, food and utilities prices rose between 10% and 20%, for starters. Food prices have risen by 10%, while prices for heating, electricity and telephone services have been raised by 20%.

Considering the fact that following October general elections, the country is still without new State or Federation entity governments, it will be difficult to a running start on addressing the country’s economic woes.

In late December, the government of the country’s Bosniak- and Bosnian Croat-dominated Federation entity opted for temporary financing in the first quarter of 2011 because political parties have yet to form a government. The parliament has yet to approve the decision. At the same time, in late December, the Bosnian Serb-dominated Republika Srpska entity formed its new government and set its new budget, with one of the first moves being to raise taxes.

It is expected that the very will happen in the Federation entity once the government there is formed, hopefully by March. Also, when the authorities on the state level are establish, one of the first moves is expected to be an increase in the Value Added Tax (VAT) rate in order to fill budget gaps. But can Bosnia’s citizens handle the prices rises and tax increases on an average monthly salary of €400? Not likely.

But even before the impact of the financial crisis began to be felt here, Bosnia was already faced with an unemployment rate of about 40%, which local economists expect to worsen and largely blame on a lack of public sector reforms. Money from the International Monetary Fund (IMF) will be used to fill some of the budget gaps, but as of next year, Bosnia will have to begin making payments on this hefty stand-by arrangement.


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