Forty years of misery
by Jasna Hasovic
Forty years of misery
Spasoje Tuevljak [current president of the B-H Council of Ministers, nominated from Republika Srpska] is simply unwilling to do any work. Travelling to his office every day from Pale, he has conceived his function in literally touristic terms. Now, of course, he has gone off to Sydney (to the Olympics). Otherwise he sits in his state premiers chair (though sometimes he does also stand, unaccountably, at the speakers podium in the Assembly). It is probably only because of his ambition from that seat to block whatever can be blocked, that Information on the Credit Obligations of B-H has been mouldering in his cupboard from June this year a document that bears witness to the enormous and undoubtedly unregulated debts of this country. Tuevljak refuses to place consideration of the debt situation on the agenda, nor will he indicate how great are the foreign debts with which the current authorities have saddled even our grandchildren. He refuses to show the citizens this list, even though he has no right to keep it secret, since he is not being required to show the list his wife has compiled personally for next months groceries.
This 120-page document, the details of which Dani is exclusively publishing, contains the facts about the total sum of B-H indebtedness. Here are some of them: the old debt, from the period up to 2 April 1992, accounts for 65% of the overall debt of B-H (2,666,175,845 DM), while post-war debts, incurred since 12 December 1995, total 1,412,912,635 DM, contributing to a final total of 4,730,817,240 DM for B-H indebtedness up to 30 June DM (3,074,632,676 DM in the Federation and 1,656,184,564 DM in Republika Srpska).
Our largest debt is with the World Bank, which has given 56% of the overall credit. About 27% are Paris Club loans and 6% from the London Club. 5% of the overall borrowing is from the IMF and 2% from the EBRD. 4% of the total debt is owed to all other creditors (Eurofima, the development bank of the Council of Europe, the Saudi development fund, IFAD, the governments of Belgium, Sweden and Japan, as well as the EC). Most of the loans, namely those from the World Bank, were given under IMF conditions - with a 25-year repayment period, a grace period of 10 years, and interest and service charges of 25%.
According to these documents, from 1996 to 1998 B-H was not obliged to pay off the principal on these debts, but was meeting obligations in the form of interest and service costs for the approved loans. Last year, 158,680,470 DM was paid out to service foreign debt obligations. Next year, 2001, B-H will be required to pay out a total of $93m, and $133m in 2002. The greatest foreign repayment obligation will hit this country in 2003, when $143m will need to be repaid.
The state of B-H is the guarantor for all these debts, while implementation of the loans is by the entity governments. Given that it is clear that the state cannot control their spending, the implementation is monitored by an independent firm of experts. Price Waterhouse did the analysis this year.
A critical situation
Each countrys indebtedness should be seen in relation to GNP, and if our GNP totals five billion this year then our indebtedness is not great and cannot be considered critical, stated Mirsad Kurtovic, in a conversation with Dani, adding, Our foreign debt is critical only if our economy remains in the current slump. The debts are dangerous only if the situation remains as it is.
Perhaps the ministers statements would sound reassuring if it were not clear that all our indebtedness is probably not registered in the Information paper, due to the general state of chaos in respect of registering, the absence of any kind of economic strategy, and the difficulties in the functioning of state organs. It is very probable that a significant proportion of the debts are not recorded on the list available to the Council of Ministers. In addition to all the details in our possession and in the possession of the Council of Ministers, there are good reasons for doubting whether this list really records all of them. The level of debt, it seems, is a lot higher as a result of the lack of any policy on international economic relations with other countries, on debt, or on any kind of development.
Our foreign debt has occurred as a result of chaos. They have it all in the files, but they cannot check it. It is not that the people who have produced this material are stupid, or that they had all the information and covered it up, but that they simply cannot get all the information. They simply cannot track down all the debts, explained the eminent economist and director of the Independent Bureau for Humanitarian Issues, Dr Zarko Papic, when he spoke to Dani. He has good grounds for suspecting that B-H, because of all its unregulated debts, will probably be the only country to have a worse record in this respect than the former Yugoslavia in the early 1980s, when the indebtedness of SFRY was within the jurisdiction of the republics of our former homeland and the Federal government of Milka Planinc had no idea of the level of the countrys foreign debt. An international organisation was even hired to establish the scale of this debt. And when it was established Milka was in despair. How Spasoje Tuevljak feels when B-Hs foreign debts are mentioned can easily be guessed at, on the basis of all that he has not done up to now.
A catastrophic credit structure
It is clear that the problem of B-Hs indebtedness is above all caused by the structure of the state and its functioning. Who in this country can say, for example, what the debt relationship is between RS and FRY? And who can guess what the financial relationship was between the para-state formation of Herzeg-Bosna, while it existed, and Croatia?
When they think about the reconstruction of B-H, everyone probably thinks of the approved $5.1bn, and perceives this sum as aid, or to be more precise as a donation. A proportion of it, and I mean a significant proportion, really is a donation; but part of it is made up of loans, some with favourable conditions and others with commercial ones, explains Dr Papic. Unlike Minister Kurtovic, he claims that Bosnia itself will definitely not be able to repay the debts, but after a certain number of years will have to request postponement and rescheduling.
Dani has already pointed out on several occasions that most of this money has been spent on infrastructure, and too little on profit-making projects. Minister Kurtovic confirms this, but believes it had to be that way. A few nights ago, I watched the film Perfect Circle for the n-th time. Its as though weve completely forgotten what Sarajevo looked like then! I agree that a lot of money has gone on infrastructure; but without electricity and water theres no economy, explains Kurtovic. But he does not claim that all loans were justifiable: Thats difficult to determine exactly, but lets say that 10% of loans were unnecessary and the projects could have been financed differently. Lets agree, for example, that it would not be permissible to raise new loans to finance a motorway.
Dr Papic, however, does not think that these are the real percentages. $5.1 billion has been approved for urgent economic reconstruction. According to available information, $4 billion was received and something less than $3 billion was implemented. Only 2% of these three billion dollars has been invested in what we call production, while 98% has been invested in so-called non-productive spheres. It is difficult now to distinguish what part of this $3 billion is a donation and what is a loan, but I know that most has been invested in projects that will not produce a profit from which loans could be repaid. These, of course, are estimates based on indicators that can be monitored. It is already clear to everyone that nothing in Bosnia can be confirmed exactly, everything can only be estimated, explains Papic.
Minister Jadranko Prlic, a generally competent judge of the mechanisms of international financial organisations, likewise estimates that Bosnia has got into debt both necessarily and unnecessarily, that not all our loans are legitimately covered though for the time being this can be heard from him only off the record.
Independence from abroad
It does not end there, of course. For now, there are no indications that the burden of foreign indebtedness will not continue to unfold in an uncontrolled manner and without the least concern for rationality. And still more dangerously, there are no indications that anything will change in respect of one essential problem, related to the fatal degree of foreign dependence of the Bosnian economy. Even after five years of nursing by the international community, Bosnia still cannot stand on its own two feet in any way.
Dr Papic too alludes to this broad, strategic problem: Everything that has happened in these five post-war years in Bosnia strengthens our total dependence on external financial assistance. The problem is that this dependence has not diminished from 95 until today. On the contrary, it has grown, and the real question is whether anything should be changed in the support policies of the international community towards countries such as Bosnia, says this highly respected economist, agreeing that there has not until now been any constructive proposal of this nature, nor is it likely that any Bosnian will be able to provide the international community with one.
What can be relied on in this context, Dani has learnt, is an analytical evaluation of international support policies that the Open Society Institute in B-H is planning to undertake as one of its priorities. This analysis should make it possible to identify the mistakes, and the learned and unlearned lessons, of the international community in Bosnia. Work on the study will begin in the next few months and should be finalized by the middle of next year with the publication of a solid document and the organization of a respectable international conference, with the idea that experience from Bosnia should be used for working out projects for the Stability Pact countries. The main aim, it seems, is to avoid the mistakes that the international community has made in B-H.
An ever greater number of experts, including Dr Papic, claim that routine, standard approaches applied everywhere have been applied also in Bosnia, irrespective of the completely different local conditions. There have been more or less the same humanitarian activities, implementation methods and reconstruction programmes: They didnt have any special programme for a typical semi-developed central European country in a post-war phase and still in transition. And the international community will get the same result in Kosovo, if it has not learnt anything from Bosnia.
Bosnia, with its desperate economy, is up to its neck in debt. Our ministry for foreign trade has to date probably produced five of these reports on the debt situation, but no one has taken them seriously, perhaps because in order to check tables you need some elementary intelligence, and to know how to read and interpret a hundred pages of tables with details about totals of agreed loans; status of debts; amounts of principal, interest and tax; matured and unpaid sums
But does this interest them at all? A fair number of people in the Council of Ministers (albeit for the time being still unofficially) maintain that Premier Tuevljak through his own behaviour persistently cultivates unprofessionalism, whether he feigns it or really has it in abundance.
So, up to the middle of this year B-H had paid 93,830,045 KM to service its debts, and by the end of the year it is expected to meet obligations amounting to 117 million KM. This year not only does $32 million of the principal need to be repaid, but also $71 million in terms of interest and tax. According to statistics from the Information paper on our foreign debts, if there are no new debts B-H will eventually be able to relieve itself of this burden in 39 years. Only in 2039 might B-H have a zero in every column (principal, interest, costs). Always provided, of course, that these are all of B-Hs debts, and that no new ones are incurred. But it may well be doubted whether that will really be the case.
This article has been translated from Dani (Sarajevo), 22 September 2000