ECONOMY

Welfare payments may swallow Bosnia region’s budget

SARAJEVO (Reuters) – Bosnia’s Muslim Croat federation may spend its entire budget this year on social spending if the government maintains high levels of welfare payments, its finance minister warned yesterday. «The fiscal system has been jeopardized so much that there is a risk it will become unsustainable by the end of the year,» Vjekoslav Bevanda told Reuters in an interview. «If the government continues to give in to requests instead of trying to put the system in order we will not have money left for anything,» said Bevanda. Bevanda has no political affiliation and offered to resign in protest this week, but was asked to stay. Generous benefits were promised to veterans, invalids, widows and orphans and other people affected from the country’s 1992-95 war between Bosnian Croats, Serbs and Muslims. Bevanda said the payouts were unrealistic and not feasible. The Muslim Croat federation allocated 40 percent of its 2008 budget of 1.76 billion Bosnian marka ($1.43 billion) for social payments but that sum was insufficient. The government decided this week to revise the budget and require the federation’s 10 cantons to bear some of the burden of financing benefits. It also said the budget deficit would be filled from VAT revenues. Bevanda said the decision was against the law and fiscal reason and was motivated by a local election due in October. «Politics is getting in the way and taking control out of the experts’ hands,» he said. «VAT receipts are used to cover budget gaps instead of being reinvested into economy. We are slowly entering a phase of organized chaos.» Bevanda, an economist, was particularly critical of the political calculation that allowed the numbers of beneficiaries for the war-related payouts to swell to eye-popping proportions. From an initial estimate of 20,000, the people due to get handouts now number over 100,000, some 8 percent of the federation’s population of almost 1.3 million. «If we had so many soldiers, we could have beaten NATO,» Bevanda said. The government has also promised to provide 350 million marka to settle outstanding debts for miners’ pensions. Bevanda said that if the government did not take a firm line demands would mount and debts would rise. «Metal workers will also ask for pension payments long due and religious officials and others,» he said. Asked about IMF concerns that a crisis with the issuance of a wartime compensation bond last month could lead to legal challenges and huge claims, he said that was a prospect too stressful to even contemplate.