RS could be left without public enterprises

04.12.2022. / 20:22

BANJALUKA – Republika Srpska and the state of its finances have recently become the subject of interest and analysis, especially because of the growing public and external debt, but also because of imprecise statements by politicians, which cause confusion in the public.

Photo: Capital

The Prime Minister of the RS Government, Radovan Višković, presented the following information at the press conference:

“And until now, the millions and billions paid by the RS have been coming from the period when we were not part of the government. And some others will pay when we are not the government. Our total debt, when I took over the government, was 48 percent of GDP, and today it is 43 percent. The public debt was 37 percent, and today it is 34 percent. I am talking about the period 2018-2022. years. Every government should do that, short-term debt, two percent interest… Do you think that we should not fulfill our obligations so that no one will say that we are in debt?”, Višković answered the question with a question.

It is interesting that he said this 20 days after the 37th special session of the National Assembly of the RS, where the Decision on the long-term borrowing of the Republic of Srpska for 2023 was adopted and where the Minister of Finance Zora Vidović presented data on the current total debt of 43.85 percent of GDP and public debt of 36.52 percent of GDP.

A serious burden on the economy and the budget

Prime Minister Višković did not say any more important facts. According to the latest available data from the Ministry of Finance and Treasury of BiH, at the end of the third quarter of 2022, the Republika Srpska has 6,215.15 billion marks in public debt.

The RS entered 2018 with a debt of 4,956.65 billion. The reason for such a noticeable difference can be found in the growth of external debt, which from 2,954.12 billion marks at the beginning of 2018, reached 4,112.35 billion at the end of the third quarter of this year. If we are guided by the knowledge that the residence in RS currently has 1.1 million inhabitants, we arrive at the fact that the debt per capita of RS is 5,650 KM (2,880 euros).

However, the problem is greater if it is not known precisely under what conditions and to whom the RS bonds were sold, the maturity of which comes in the year that is just around the corner.

“The situation with the debts of the RS created in the previous period through bonds on the Vienna and later the London Stock Exchange are a serious burden on the economy and the budget of the RS. It is completely unreasonable that that money was spent, probably on infrastructure projects, without being invested in some productive and profitable activity that would increase the GDP and thus achieve benefits and earnings from which the loan obligation would be serviced. The concept of debt on the Vienna Stock Exchange for five years with the obligation to repay the debt in the fifth year is dangerous. That’s what awaits us now. The conception of the Ministry of Finance, including President Milorad Dodik, that it will be returned with another loan is unacceptable in the banking system. Obviously, another problem is emerging – inflation and growth of EURIBOR, capital prices. Any new debt will therefore be more and more unfavorable and more expensive”, believes Zoran Pavlović, an economist from Banja Luka.

And to completely ignore where the funds from the issue of bonds placed on the London Stock Exchange at an interest rate of 4.75 percent and bonds from the Vienna Stock Exchange were spent, the referenced four-year period indicates that the budget of the RS since 2019 is increasingly filled from the item “receipts from borrowing”, while “debt repayment expenses” are usually smaller.

“In the previous five years, no funds were allocated or a surplus was created in the budget that would be intended for servicing obligations. The sudden inflow of surplus funds from indirect taxes, as a result of rising prices of goods and inflation in the amount of 400 million marks (200 million euros), was not deposited to finance the loan repayment. Every host would do that, except for the Government of the RS. The policy of servicing international obligations based on new borrowing reminds me of the situation when a man took out the first loan, which he paid back by taking out the second, then the third… When he died, the last banker who was supposed to get his money claimed that he would have paid back that loan too if he didn’t die. I am afraid that the RS is going down a certain path, that international creditors, due to the impossibility of repaying the assumed obligations, will raise legal questions about taking over property in which the RS is the majority owner.”states Pavlović.

The right to privatize public enterprises

And what else is there to be privatized and taken over in Republika Srpska? The companies that were the most profitable have already been sold, like Telekom. Private capital has already deeply penetrated the power sector, such as mines, thermal power plants, refineries, hydropower… The food sector has been “solved”. Lately, everything left has been sold out.

However, few dare to publicly warn about such a situation, like the Banja Luka portal Capital.ba.

“At this moment, RS still has Elektroprivreda and forests at its disposal. We still do not know what the guarantees were for the sale of the two large bond issues abroad. With the entry of investment capital into Elektroprivreda RS, such as the Hungarian fund and the Government of Serbia, quiet privatization began. The oil industry was left behind and the remaining part of the state’s capital has no great value,” says the editor-in-chief of the Capital.ba portal Siniša Vukelić.

He adds that the most difficult job in the future will be the Minister of Finance, whoever it is. The current minister, Zora Vidović, believes that ‘RS is still in good shape’, with which the expert public, however few it may be, does not agree.

“The document of the Vienna Stock Exchange, which provides information about someone selling bonds and is called the Prospectus, contains items in the event that the RS cannot return the money, the bondholders have the right to privatize any company. So, all public companies. I can ask for a part of Šum Srpska or Voda Srpska, waterworks, hydropower plants, part of the electrical system…” warns Pavlović.

These days, the sale of a package of shares (shares) on the Banja Luka Stock Exchange is coming to an end by entering group orders on the principle of “all or nothing” for 60 companies with full or majority state ownership of the RS. The work is carried out by the Investment Development Bank of the Republika Srpska and the Company for the Management of the Pension Reserve Fund of the RS.

The President of the RS, Milorad Dodik, said that it was purely a banking issue and their decision. The public doubts the possibility of the aforementioned institutions making such decisions autonomously, as well as general borrowing without Dodik’s knowledge. The already mentioned Decision of the NSRS on long-term indebtedness for the year 2023 foresees 1.08 billion marks of new indebtedness.

“Maximum interest rate: six-month or twelve-month Euribor plus a fixed margin of up to four percent for bonds or loans from domestic banks. Loans with international creditors maximum 5.5 percent per year; and the issue of bonds on the international financial market at a maximum margin of 7.5 percent per year”, it is stated in the document approved in NSRS on November 2.

Getting into excessive debt

Financial institutions under the patronage of the Government cannot boast of transparency. On the official website of the Investment Development Bank (IRB), the comparative presentation of the economic indicators of the RS with its neighbors and the European Union was last entered in 2020.

“It is running unstoppably into overindebtedness. Although the border has not been crossed, we are very close to a state of no return. Unexpectedly large inflows of money, such as the sale of Telekom in 2006, and this year’s inflow from VAT only produced excessive employment and large expenditures in the budget. After the money was spent, the expenses remained the same. The pandemic, and then inflation, led to the search for a way out in borrowing. Non-transparent debt on the Vienna and London Stock Exchanges, under unfavorable conditions, are insufficient to service internal expenditures. The authorities do not see or do not want to find solutions for the refinancing of existing debts and internal consumption”, concludes Siniša Vukelić.

Most economists believe that non-transparency, that is, the unknown purpose of funds, is a greater threat than the interest rate. One could also look for the biggest threats to the Republika Srpska itself and the (self) sale of its substance.

“Nothing is done in a transparent way. Obviously, the influence of politics is stronger and the influence of the prime minister, ministers and others are abused. The International Monetary Fund (IMF) demanded the abolition of the Great Credit Board, because the RBI practically consisted of the government’s political structure, which granted loans without adequate collateral directly. This is why the RBI suffered significant losses,” says Zoran Pavlović.

But at least two things are completely clear with the adoption of the Budget of the RS for 2023 – the share of debt is 20.1 percent, and the expenses of President Milorad Dodik’s cabinet are 56.5 million marks (28 million euros) with a share of 1.05 percent budget. At his own discretion, the president will be able to dispose of funds that are greater than all the cities and municipalities of the entities he manages, with the exception of Banja Luka and Bijeljina. AL JAZEERA BALKANS


Source: Capital.ba – Informacija je capital by www.capital.ba.

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