Bosnia and Herzegovina facing economic and political crises

Mon 22 May 2017

Bosnia and Herzegovina facing economic and political crises

Last week Bosnia’s parliament failed to adopt an excise law. Adoption of the law was a condition for the country  to receive more than 1 billion dollars in support from the IMF, the World Bank and other key lenders. The financial support was supposed to be used for economic reforms, such as investments infrastructure projects and the modernisation of the banking sector legislation.

Struggling coalitions

The failure to adopt the excise law is part of a bigger problem; the ruling coalitions at the state level and in the country’s two entities, the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS), struggle to obtain working parliamentary majorities. Opposing parties formed coalitions without setting clear common goals and a working programme. Parties are now mostly preoccupied with fighting each other and only make coalitions on a case-by-case basis. The fact that the several ethnic groups, most prominently Croats, Bosnians and Serbs, operating in Bosnia’s political system have different aspirations makes matters even more complicated.

Economic and political problems

Without the financial support of the international key lenders Bosnia is likely to face a liquidity crunch. Local officials have reportedly set their eyes on commercial borrowing to continue funding the infrastructure projects. This could lead to a grave economic downturn though as Bosnia and the entities are expected to have difficulties with paying off debts and simultaneously keeping up public spending.

Besides the economic problems the country is also facing a political crisis. In December 2016 Bosnia’s Constitutional Court ruled that the election law related to the election of the Federation House of Peoples, the lower house of the FBiH, are unconstitutional due to the different weight of votes in different cantons. The state parliament was obliged by the court to amend the law before 1 June. With only two weeks left until that deadline MEPS have not managed to come to an agreement. The Constitutional court will probably strike down the problematic parts of the law itself, which could lead to a legal situation in which the lower house cannot be formed after the 2018 elections. Consequently governments and parliament won’t be able to form in the FBiH or at the national level.

Possible solutions

Some hope that the impendent crises will lead to closer involvement of the EU and US and that they will prevent the country from falling into lawlessness. US and EU officials however say they are not planning on interfering.

The political parties could also try and form for new ruling coalitions, but it is expected they won’t do this and that the political deadlock will remain. Furthermore many are sceptical about the success of new coalitions, as they don’t view the failing coalitions as the core problem but the parties themselves.

Sources: Balkan Insight, the Guardian