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Europe > Bosnia and Herzegovina

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Cover IMF Working Papers
Climate Change Mitigation and Policy Spillovers in the EU’s Immediate Neighborhood
Mr. Serhan Cevik, Mr. Nadeem Ilahi, Mr. Krzysztof Krogulski, Ms. Grace B Li, Sabiha Mohona, and Yueshu Zhao
EU’s neighborhood countries (EUN) have lagged the EU on emissions mitigation; coal-heavy power generation and industrial sectors are a key factor. They have also trailed EU countries in emissions mitigation policies since 2000, with little use of market-based instruments, and they still have substantial fossil fuel subsidies. Increasingly stringent EU mitigation policies are asociated with lower emissions in EUN. Overall output effects of the CBAM, in its current form, would be limited, though exports and emissions-intensive industries could be heavily impacted. A unilaterally adopted economywide carbon tax of $75 per ton would significantly lower emissions by 2030, with minimal consequences for output or household welfare, though a safety net for the affected workers may be necessary. To become competitive today by attracting green FDI and technology, overcoming infrastructure constraints and integrating into EU’s supply chains, EUN countries would be well served to front load decarbonization, rather than postpone it for later.
Keywords:
Climate change; carbon emissions; climate change mitigation; carbon tax; Europe; EU mitigation policy; EUN country; policy spillover; neighborhood country; Greenhouse gas emissions; Climate policy; Global
Cover IMF Staff Country Reports
Bosnu I Hercegovinu: Konsultacije Prema Članu IV Za 2023-Saopštenje Za Medije; Izvještaj Osoblja; I Izjava Izvršnog Direktora Za Bosnu I Hercegovinu
International Monetary Fund. European Dept.
Kontekst: Nakon snažnog post-pandemijskog oporavka tokom 2021. godine, ekonomski rast se nastavio po umjerenoj stopi od 3,9 posto tokom 2022. godine (nakon 7,4 posto u 2021. godini), dok se Bosna i Hercegovina (BiH) suočavala sa negativnim udarima po pitanju cijena hrane i energije, ekonomskim usporavanjem u Evropi i kontinuiranim političkim tenzijama na domaćem planu. Inflacija je u padu nakon što je u oktobru/listopadu dostigla svoj najviši ikada zabilježeni nivo od 17,4 posto, ali je i dalje visoka. Većina strukturalnih reformi je još uvijek na čekanju a status kandidata za članstvo u EU, koji je BiH dobila u decembru/prosincu 2022. godine, još nije doveo do zamaha.
Keywords:
Bosnia and Herzegovina parliament; coverage ratio; authorities of Bosnia and Herzegovina; core inflation; council of ministers Kristo; Capital spending; Loans; Wages; Europe; Global
Cover IMF Staff Country Reports
Bosnia and Herzegovina: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bosnia and Herzegovina
International Monetary Fund. European Dept.
After a strong post-pandemic rebound in 2021, growth moderated to 3.9 percent in 2022 (from 7.4 percent in 2021), with Bosnia and Herzegovina (BiH) beset by negative food and fuel price shocks, the economic slowdown in Europe, and ongoing domestic political tensions. Inflation has been declining from an all-time high of 17.4 percent in October, but it remains high. Most structural reforms remain on hold, and EU candidacy status, granted in December 2022, has yet to create momentum.
Keywords:
Bosnia and Herzegovina parliament; coverage ratio; authorities of Bosnia and Herzegovina; core inflation; council of ministers Kristo; Capital spending; Loans; Wages; Europe; Global
Cover Selected Issues Papers
Surviving Low Interest Rates Central Banks in Kosovo and Other Western Balkan Countries: Republic of Kosovo
Mr. Si Guo
Interest income from foreign reserves is one of the main revenue sources for most emerging market central banks. For central banks in the Western Balkan region, the low global interest rates during 2008–2021 negatively affected their revenues, and the impact was more pronounced for central banks in Kosovo, Montenegro, and Bosnia and Herzegovina because they cannot use seigniorage to finance their operations. This paper explores how these central banks coped with the long period of low-interest rates. The main finding is that the decline in interest income from foreign reserves was partially compensated by higher fees, commissions, and other regulatory revenues.
Keywords:
Central bank; Low interest rates; Kosovo; Montenegro; Bosinia; Herzegovina; interest income; central banks in Kosovo; emerging market central banks; rising interest rates; personnel cost-to-GDP ratio; Income; International reserves; Central bank rates; Government securities; Exchange rate arrangements; Global
Cover IMF Working Papers
Inflation Dynamics in the Western Balkans
Gohar Minasyan, Ezgi O. Ozturk, Magali Pinat, Mengxue Wang, and Zeju Zhu
After trailing Euro Area inflation closely in the recent past, inflation in the Western Balkans has accelerated faster since early 2022 on the back of the shocks to global commodity prices, strong recovery from the pandemic, and lingering supply bottlenecks. This paper employs two complementary empirical approaches of an augmented Phillips curve and structural VAR, adapting them to the data availability and country specificities of the Western Balkans, to analyze the inflation dynamics in the region. It finds that international food prices affect not only headline but also core inflation as well as inflation expectations. Further, inflation in the Western Balkans is not just determined by foreign shocks, and domestic factors, aggregate demand shocks in particular, have a significant impact on inflation. These findings imply a possible role for policies to temporarily limit an immediate and complete pass-through of international to domestic food prices while also stressing the importance of an appropriate domestic macroeconomic policy mix to keep inflation expectations anchored and safeguard credibility in the face of high inflation persistence.
Keywords:
Inflation; Western Balkans; international food price shocks; commodity price shocks; Phillips curve; panel data; structural VAR; inflation expectation; inflation dynamics; inflations determinant; inflation development; inflation in the Western Balkans; Food prices; Energy prices; Nominal effective exchange rate; Global; Europe
Cover IMF Working Papers
The Future of PPPs in the Western Balkans
Mr. Jan Kees Martijn, Ms. Yan M Sun, William Lindquist, Yen N Mooi, Ezgi O. Ozturk, Hoda Selim, and Armine Khachatryan
Public-Private Partnerships (PPPs) are increasingly an important vehicle for several Western Balkan countries to increase investment to reduce their infrastructure gaps. While there are benefits to well-designed and implemented PPPs, they also carry a potential for large fiscal risks and increased costs if not managed well. Countries with successful PPP programs typically benefit from a clear and well-designed PPP governance framework, which covers all stages of the PPP life cycle. Western Balkan countries need to address gaps in their PPP governance frameworks to fully reap the potential benefits from PPPs.
Keywords:
Infrastructure; Public-private partnerships; Western Balkans; governance framework; PPP procurement; PPP life cycle; future of PPP; PPP project; Fiscal risks; Public investment spending; PPP legislation; Risks of public-private partnership; Europe; Global
Cover IMF Staff Country Reports
Republic of Kosovo: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper focuses on challenges and opportunities in Kosovo’s electricity sector. Energy market pressures in Europe are likely to continue throughout 2023. Higher energy prices represent a heavy blow for Kosovo’s current account. The tariff-setting framework is broadly sound, but the increase in European electricity prices has led to challenges. Higher European electricity prices have stressed the sector’s flows, creating liquidity choke points. Higher European electricity prices and lower domestic electricity supply may result is significant stress for Kosovo’s energy sector and budget. In the short term, more efficient use of electricity should reduce demand and contribute to balance the system in 2023. In the medium term, boosting energy efficiency and diversification away from lignite is priority. To that end, creating a fund for the renewal and expansion of domestic electricity generation capacity in green technologies could be explored. Starting to explore carbon pricing would strengthen price signals and result in more efficient demand and less carbon intensity.
Keywords:
tax revenue growth; policy implication; Electricity supply chain; central banks in Kosovo; electricity sector; Electricity; Income; Natural gas sector; Tax administration core functions; Europe; Global
Cover IMF Working Papers
Labor Taxation in the Western Balkan: Looking Back and Forward
Mr. Alain Jousten, Mario Mansour, Irena Jankulov Suljagic, and Charles Vellutini
This paper examines how labor taxation (personal income taxes and social security contributions) in the Western Balkan contributes to labor market outcomes such as high informality and a significant gender gap in participation rates. We find that limited progressivity combined with high tax wedge on low incomes poses a major twin equity-efficiency challenge in the region, resulting in low redistributive capacity and inadequate incentives to enter the job market. Policy implications are discussed with a view to alleviating the excessively high tax wedges on low incomes, while improving progressivity of income taxation.
Keywords:
Western Balkan; labor taxation; labor tax wedge; personal income tax; corporate income tax; social security contributions; income taxation; SSC reduction; employer SSCs; Labor taxes; Tax wedge; Wages; Labor markets; Europe
Cover IMF Working Papers
Raising Armenia’s Export Potential
Klakow Akepanidtaworn, Lili Karapetyan, Nathalie Reyes, and Ms. Yulia Ustyugova
Raising Armenia’s long-term growth prospects is critical to meet the pressing need for jobs, achieve higher living standards, and arrest emigration. Armenia’s long-term growth prospects have weakened since the global COVID-19 crisis, while recent global and regional the geopolitical developments added new shocks. This paper argues that there is a need to boost the potential of the tradable sector by focusing on products with higher complexity to sustainably increase Armenia’s growth rate. It provides an overview of Armenia’s export performance, analyzes factors and policy valuables that affect export outcomes in terms of volumes and composition, and draws policy implications.
Keywords:
Empirical Studies of Trade; Trade Policy; Armenia trade agreements; Armenia's export potential; policy valuables; export Complexity; unit root; Exports; Export performance; Service exports; Trade agreements; Real effective exchange rates; Global; Europe
Cover IMF Staff Country Reports
Bosnia and Herzegovina: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bosnia and Herzegovina
International Monetary Fund. European Dept.
Bosnia and Herzegovina (BiH) is facing considerable challenges just as it has rebounded from the Covid-19 pandemic. Spillovers from the war in Ukraine are fueling inflation and weighing on domestic spending and external demand, while domestic political tensions are hampering economic policies and reforms.