Bosnia and Herzegovina
Technical Assistance Report-Government Finance Statistics Mission

This Technical Assistance Report discusses the recommendations made by the IMF mission to assist the statistical authorities of Bosnia and Herzegovina (BiH) with setting up a register of public sector units and further enhancing the debt data based on the framework of the Government Finance Statistics Manual 2014 and European System of National and Regional Accounts. It is recommended that the three statistical institutes (BiH Agency for Statistics, Institute of Statistics, and the Institute of Statistics of the Federation of BiH) should draw up a provisional list of government controlled entities before the sectorization project starts in October 2015. The list should comprise all entities where government exercises some influence.

Abstract

This Technical Assistance Report discusses the recommendations made by the IMF mission to assist the statistical authorities of Bosnia and Herzegovina (BiH) with setting up a register of public sector units and further enhancing the debt data based on the framework of the Government Finance Statistics Manual 2014 and European System of National and Regional Accounts. It is recommended that the three statistical institutes (BiH Agency for Statistics, Institute of Statistics, and the Institute of Statistics of the Federation of BiH) should draw up a provisional list of government controlled entities before the sectorization project starts in October 2015. The list should comprise all entities where government exercises some influence.

Executive Summary

In the context of the Swiss State Secretariat for Economic Affairs (SECO)-funded government finance statistics (GFS) project for selected Southeastern European countries, a technical assistance (TA) mission visited Sarajevo, Bosnia and Herzegovina (BiH), during the period of April 20–May 1, 2015. This mission was the second in a series of three missions to BiH to be conducted under the SECO GFS capacity building project, and this built upon the work previously carried out during the recent missions in April 2014 and January 2015.

The main objective of this second TA mission was to assist the statistical authorities of BiH with setting up a register of public sector units and further enhancing the debt data based on the framework of the Government Finance Statistics Manual 2014 (GFSM 2014) and European System of National and Regional Accounts (ESA 2010). The mission met with officials from the Central Bank of BiH (CBBH), BiH Agency for Statistics (BHAS), Republika Srpska (RS) Institute of Statistics (RZS), Institute of Statistics of the Federation of BiH (FZS), Ministry of Finance (MOF) of the Federation of BiH, and the Ministry of Finance of the RS.

The main findings and recommendations are as follows:

  • The mission found several lists of public enterprises kept by different national institutions. However, they were incomplete or not up-to-date. The largest publicly available lists of public enterprises are maintained by the institutions responsible for privatization (the Federal Agency for Privatization and the RS Investment-Development Bank). The FZS informed the mission that it has a more comprehensive list of public enterprises, including an assessment of market/nonmarket producers, but the list could not be provided during the mission due to confidentiality.

  • The mission was informed that the Instrument for Pre-Accession Assistance (IPA) twinning project on sectorization will start in October 2015 and the work will be concluded in March 2016. The main output of this project will be a manual providing guidelines for classifications, and a list of entities classified to (sub) sectors according to ESA 2010.

  • The three statistical institutes (BHAS, RZS, and FZS) should draw up a provisional list of government controlled entities before the sectorization project starts in October 2015. The list should comprise all entities where government exercises some influence. During the sectorization project the list can be cleared for entities which are not controlled by government. If such a list will not be available on time, the sectorization project might fail. The various currently available lists of entities could be used as a starting point, but should be checked for completeness.

  • The time schedule for the IPA project on sectorization is quite ambitious. In the project, the focus should be on the classification of the largest public entities in terms of revenue/expenditure and debt (top-down approach). The project should especially analyze the two development banks, the deposit insurance agency, public transport companies, and public broadcasting companies.

  • The mission recommended that the three official statistical institutes (BHAS, RZS, and FZS) should reconsider their current official policy to keep the list of public sector units as confidential information that may not be published or provided to other parties. It is good practice to make this information available to the public. Although it is envisaged that in 2016 a list with general government units will be published by the BHAS, the mission recommended changing this policy beforehand.

  • The CBBH and the BHAS still do not have access to all source data and other information which is needed to produce high-quality GFS. Statistical institutes need automatic access to government registers and administrations. Such access should be laid down in law and further elaborated in mutual agreements between statistical institutes and data collecting government institutions. In particular, it concerns the registers held by the privatization institutions, the service payment institutions (APIF and AFIP), and the securities commissions and registries. In addition, the statistical authorities should also have access to financial statements and reports in order to decide on the statistical classification of entities.

  • The production of GFS will benefit from closer cooperation among the CBBH, the MOFs, and the statistical institutes. Cooperation between the CBBH and the BHAS could be improved, but also between the institutes at entity level. A permanent working group of compilers of macroeconomic statistics in different institutions should be set up to this aim as was advised in previous TA missions. Better cooperation could also solve the issue of the lack of resources as the same work may now be done in parallel by different institutions.

  • The mission took note of further progress by the CBBH on the compilation of public sector debt data. Quarterly data on public sector data are ready to be transmitted to the World Bank and the IMF for the public sector debt database. The CBBH agreed to provide these data after an official written request from the IMF to the CBBH.

  • The balance sheet and debt data for general government have not been published yet nationally. The CBBH is continuously improving the balance sheet data. The CBBH will get statistical assistance from the current IPA twinning project (subproject on financial accounts) to value non-quoted shares according to ESA 2010/GFSM 2014. The CBBH is also able to compile stock-flow adjustment tables, both for debt at market value and Maastricht debt. The mission recommended that stock-flow adjustment tables be compiled during the debt data compilation to ensure reconciliation between flows and stocks.

  • The following benchmark actions will help BiH’s progress in the area of GFS and follow-up TA in the third mission under the SECO project. The mission is of the view that: (1) the body for classification of public sector units should convene as soon as possible and it should discuss the division of tasks and sharing of information and knowledge; (2) the statistical institutes in cooperation with the MOFs and the CBBH should produce lists with public enterprises, private enterprises (partially) owned by government and public institutions; and (3) the statistical institutes should identify which entities on the provisional list do not have sufficient information available to assess government control and market vs. nonmarket producers.

The mission would like to thank all the staff of the institutions that were visited for the useful discussions and information provided. Appendix I provides a list of officials met during the mission.

I. Introduction

1. The technical assistance (TA) mission to Bosnia and Herzegovina (BiH) was conducted in the context of the Swiss State Secretariat for Economic Affairs (SECO) project. The objective of the 18-month SECO-funded government finance statistics (GFS) project is to strengthen capacities of the five participating countries in the compilation and dissemination of GFS data based on the latest international standards. As all participating countries have applied for European Union (EU) membership, this project supports the implementation of both the Government Finance Statistics Manual (GFSM 2014) and the European System of National and Regional Accounts (ESA 2010). The focus is on delineating the public sector, developing a full register of the institutional units for dissemination, and improving debt data compilation and dissemination in the public sector debt statistics database. The project will also identify priorities for further development of GFS and debt statistics to fill data gaps identified under the project, and help countries prepare time-bound action plans.

2. The main objective of this second TA mission was to assist the statistical authorities of BiH with setting up a register of public sector units and further enhancing the debt data based on the GFSM 2014/ESA 2010 framework.

3. The major tasks of the mission were to (i) help the statistical authorities with setting up a register of public sector entities, classifying borderline cases, and disseminating a list with public sector units; (ii) further assist the statistical authorities with the compilation of public sector debt statistics; and (iii) evaluate and update the work plan that was set up during the previous mission and discuss the action points. The mission met with officials from the Central Bank of BiH (CBBH) and the BiH Agency for Statistics (BHAS). Meetings with the ministries of finance (MOFs) and the statistical institutes of the Federation of BiH (FBiH) and the Republika Srpska (RS) also took place.

4. This report has five sections, including the introduction. Section II provides general information on the institutional arrangements and discusses the delineation of the public sector in BiH. Section III describes the progress with compiling public sector debt data. Section IV contains the updated action plan toward full general government coverage and dissemination of public sector debt statistics. In Section V, the report concludes with an assessment on the resources, training, and further technical support needs.

II. Institutional and Data Coverage of the Public Sector

Legal framework

5. The authority of the CBBH to request data and information from government units is granted by the CBBH Law (Article 68) and the CBBH By-law. The CBBH By-Law also specifies that in its implementation, guidance provided in two CBBH official documents should be followed: the Terms of Reference for Data Reporting and the Statistical Methodology Framework. The CBBH By-law specifies the scope of the responsibility of the CBBH for collecting, compiling, and disseminating monetary statistics, balance of payments statistics, and GFS. The assignment of the responsibility for collecting, compiling, and disseminating GFS solely to the CBBH was confirmed by an agreement reached between the CBBH and the MOFs in July 2003.

6. The responsibility for compiling GFS resides with the CBBH’s Statistics and Publication Department. The Statistics and Publication Department consists of four units, named according to their area of responsibility: (i) Monetary and Financial Statistics; (ii) GFS and Financial Accounts Statistics; (iii) Balance of Payments Statistics; and (iv) Publications.

7. The BHAS is responsible for the compilation of national accounts and the statistical classification of units in BiH in cooperation with the two statistical offices of the entities RS and the FBiH. For the national accounts, BHAS applies the European System of Accounts guidelines. One of the main priorities of the BHAS is the adoption of ESA 2010 which is supported by the EU through TA in the context of the Instrument for Pre-Accession Assistance (IPA).

8. There are only incidentally discussions between the BHAS and the CBBH regarding compilation of general government data. A regular and structured cooperation is still not in place. Both institutions have their own data flows from the data suppliers. The BHAS gets data on the FBiH and RS from the respective statistical institutes in the FBiH and RS, which are supplemented with own data for BiH at state level and the District of Brčko. The source data for GFS are mainly provided to the CBBH by the three MOFs (BiH, FBiH, RS), cantonal ministries of finance, and numerous extra-budgetary and social funds. Currently, there is a signed Memorandum of Understanding (MoU) between the CBBH and the BHAS, but cooperation between the two institutions could be intensified to have consistency between all macroeconomic statistics. The CBBH and the BHAS should discuss and agree on the possible future compilation of statistics related to the excessive deficit procedure (EDP) which is mandatory for EU member states and of which the production is encouraged for candidate countries. However, in the short term, the priorities have been given to other projects such as revision of the national accounts according to ESA 2010 and developing regional accounts. The BHAS is currently improving its expertise on general government accounts according to ESA 2010. They attended meetings of the financial accounts working group and a workshop on EDP statistics organized by Eurostat.

9. There are no MoUs between the CBBH and the BHAS on the one side and the MOFs on the other side. Whereas a draft MoU was produced, no agreement could be reached about the final text. The cooperation of the different institutions involved in the compilation of GFS could be improved in many respects, especially data sharing. The mission noticed on several occasions that availability of data in one institution was not known to the other institution, and sometimes could not even be shared. The mission did not observe any improvement in the cooperation among the MOFs, statistical institutes, and the CBBH since previous missions. The CBBH as well as the BHAS are not able to exercise legal power to require data. This hampers sound macroeconomic statistics.

Description of general government and public sector (Government Finance Statistics Yearbook institutional table)

10. BiH is composed of the two entities Republika Srpska (RS) and the Federation of BiH (FBiH), and the District of Brcko. The two entities RS and FBiH have a high degree of autonomy, and each comprise about half of the country. Unlike RS, FBiH has 10 cantons. Both entities have municipalities and cities. Many of the tasks commonly observed as the responsibility of the government at the national level in BiH are found at the entity level. For example, tasks related to issues like unemployment, social security, health, and highways are under the responsibility of the entity and cantonal level authorities. This is also reflected by the budgets, where the budget of the government on the national level (BiH institutions) accounts for about 10 percent; FBiH, 60 percent; and RS, 30 percent.

11. The budgetary central government includes the ministries, agencies, and other administration offices at the BiH level, the RS, the FBiH, the 10 cantons of FBiH, and the DB. The local government subsector is comprised of 139 municipalities and 4 cities from both entities. The subsector social security funds consists of pension funds, unemployment funds, health care funds, and funds for professional rehabilitation and employment of the disabled. One fund for care of children is found only in RS.

12. Previous GFS TA missions advised reclassifying the FBiH cantons as state governments. The CBBH has not yet implemented this viewpoint as it argued that the current classification as central government fits best the administrative structure, jurisdiction, and competencies in BiH. The latter view is also shared by the MOFs in BiH. The CBBH is also of the opinion that the current classification is in accordance with the GFSM 2014. The issue will be again examined in the upcoming process of sectorization.

13. Extrabudgetary central government in GFS is currently comprised of public enterprises for road reconstruction and maintenance on the entity and cantonal level, and public enterprises for highways on the entity level. However, BiH has many other public enterprises. A substantial part of these public enterprises, such as the railways companies and broadcasting corporations, are largely subsidized by government and thus may be reclassified in the general government sector after further examination.

Broaden coverage: general government and public sector

14. The production of a list with units classified according to ESA subsectors will be done in a subproject on sectorization within the IPA twinning project funded by the EU in the context of the IPA and with experts from Finland. The BHAS and the two statistical offices of the entities are in charge of this project. The project on sectorization will begin in October 2015 when the external statistical experts visit BiH. The project will be completed by the end of March 2016. On request of the IMF mission, the BHAS has agreed with the project board that the classification of public financial and nonfinancial corporations will be included in this project. The classification of the cantons will also be dealt with in this sectorization project. The output of the project will include a manual with classification guidelines, and a list of institutional units classified according to ESA 2010 (sub) sector classification.

15. An EU-funded project on public accounting and public finance data, which was concluded by end 2014, among other activities, included drawing up a list of general government units according to ESA. The project resulted in a provisional list with more than 2000 entities,1 mostly budget users (LIST1). To produce this list, the statistical institutes got an input from the MOFs in BiH. According to the BHAS, the current business register cannot be used to delineate the general government sector. During the diagnostic mission, it was concluded that most entities on this list are not institutional units, but entities such as schools and hospitals that have already been consolidated within the government accounts, and thus taken into account in current GFS. This should be analyzed and verified. The CBBH, BHAS, and other stakeholders have not yet reviewed this list. The federal statistical institutes and MOFs indicated during the mission that they were only involved in the compilation of the list at a very late stage of the project. The FBiH agreed to check the list for the FBiH entities before October 2015. Public enterprises that qualify as general government units are missing on this list.

16. Four categories of public sector entities can be distinguished in BiH: core government entities (budgetary entities), public (extrabudgetary) institutions, public enterprises, and private enterprises controlled by general government. The budgetary units should be included on LIST1. An overview of public institutions was not found. It should include hospitals, clinical centers, and regulatory institutions. Public enterprises (javno preduzecé) should comply with separate legislation. Several lists are available, but all provide only a part of the population. In BiH, the line ministries are responsible for the management of public enterprises, and thus no centralized unit within government can provide a complete list of public enterprises. For the FBiH, a list of public enterprises was incidentally published in the Official Gazette in 2011. It contained about 40 units. Some of them have been privatized since then.

17. The mission discovered that the concept of institutional units needs further clarification of the BiH statistical authorities. This should be incorporated in the envisaged manual with classification guidelines. One of the issues concerning the hospitals is that it is not clear whether they are fully or only partially covered by the health funds, and whether they should be seen as autonomous institutional units.

18. Lists of public enterprises that will be privatized are available on the website of the privatization agency of FBIH and the RS (LIST2). According to the list of the FBiH Agency of Privatization, 352 public enterprises are to be privatized. The list of the RS Investment-Development Bank, responsible for privatization in the RS, shows 187 public enterprises which are still mainly owned by government in 2015. However, these lists only contain enterprises to be privatized, while there are a large number of enterprises that have not been assigned for privatization.

19. The FZS informed the mission that it has a list of public enterprises (LIST3). This list also indicates which entities are market and nonmarket producers, based on the so-called 50 percent test in ESA 95. The FZS said that it cannot provide the list to the IMF as it considered the information in the list to be confidential. They said that about half of the units on the list are nonmarket producers and are thus included in the general government consumption of the BiH national accounts (but not in GFS compiled by the CBBH).

20. The MOF FBiH gets monthly reports on loans from public enterprises. However, the MOF FBiH could not guarantee that the reported debt data were reliable. These data are not published and shared with other organizations. However, the reports may give a good impression of public enterprises with high debts. The sectorization project should give priority to entities with high debt levels.

21. For the monetary statistics compiled by the CBBH, banks provide additional information on deposits and loans of general government. The general government in monetary statistics is almost fully aligned with GFS. Banks also provide the Monetary Statistics Unit of the CBBH with data on deposits and loans of public nonfinancial enterprises. However, the Monetary Statistics Unit does not have a list of public enterprises as it is assumed that the reporting banks know which entities are public enterprises.

22. The mission was not able to assist the statistical authorities with the classification of borderline cases as the lists of public entities could not be provided yet and no information on control and market versus nonmarket production could be shared. However, during meetings the mission discussed some special entities for which specific criteria may be taken into account.

23. The mission stressed that, for financial institutions involved in financial intermediation, the assessment of market and nonmarket production should not be made on the basis of the 50 percent rule but on the analysis of the party who bears the financial risk. Special attention should be paid to the two development banks and the deposit insurance agency. It was also stressed that supervisory authorities of financial intermediaries and financial market are classified in the subsector of financial auxiliaries if these institutions qualify as institutional units. On the other hand, regulatory bodies operating in the field of nonfinancial activities such as telecom regulation/supervision are recorded in general government, irrespective of own revenues, mostly fines and compulsory levies. The public radio and television companies also need special attention. Since one of their resources is compulsory fees, they may not be considered as market sales since compulsory unrequited payments should be classified as taxes. These fees should then be recorded as grants from government to these radio and television companies which affect the assessment of the market versus nonmarket test.

24. It is also important that indirect government control is taken into account when delineating public sector. For example, the electricity company in the FBiH, Elektroprivreda Bosne i Hercegovine, has 10 affiliates of which 6 are state-owned coal mines.

25. An institutional table describing the current institutional structure of general government in BiH used by the GFS Unit of the CBBH is presented in Appendix II.2

III. Public Sector Debt Compilation and other Issues

Balance sheet and public sector debt

26. The compilation of annual financial balance sheets for general government and public debt data of BiH has been the topic of previous TA missions. The mission took note of further progress. However, the financial balance sheet and debt data are not yet published on the CBBH website. The mission encourages publication of data on the CBBH website as soon as possible (Appendix III).

27. The CBBH informed the IMF of the discrepancies related to deposits between the source data obtained from the MOFs and the monetary statistics. From 2015 onward, GFS will use the monetary statistics for transactions in deposits as it is of the opinion that it has a broader coverage than the source data where some accounts are not in the main ledger. However, this may lead to larger statistical discrepancies which have to be analyzed.

28. The mission showed the CBBH how to compose so-called stock flow adjustment tables. The stock flow adjustment tables presents the change of debt as a result of net lending / net borrowing, transactions in financial assets, and some other flows (foreign currency exchange rates). The completion of such tables for both debt at market value and at face value according to EU definition was demonstrated. The latter is also compulsory in the EU in the framework of the EDP statistics (Table 3 in the EDP notification tables). The first results showed small unexplained discrepancies. The compilation of such tables is very helpful for reconciliation of stocks and flows in the compilation of GFS.

29. The CBBH also showed progress in developing derivation tables that show what adjustments to the source data need to be made to arrive at the revenues and expenditures according to GFSM 2014.

Statistical coverage of fiscal data compiled and disseminated

30. In 2014, the CBBH transmitted to the IMF for the first time data in the Government Finance Statistics Yearbook Tables 4, 5, 6, and 9. BiH also participates in the General Data Dissemination System, but information needs to be updated. Currently, the CBBH only disseminates three tables on GFS. It regards revenues and expenditures according to the Government Finance Statistics Manual 2001 (on annual and quarterly bases, and by different levels of government), quarterly data on foreign government debt held by creditors, and quarterly data on foreign debt servicing, including principal and interest payments.

IV. Action Plan for Implementing GFSM 2001/14

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Project Objectives

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Project Outputs

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V. Resources, Training, and Technical Assistance

31. The CBBH’s GFS Unit and the BHAS National Accounts Department need further resources to fully adopt GFSM 2014 and ESA 2010. Currently, the GFS Unit consists of four staff members including the head of unit. The BHAS National Accounts Department has seven staff members. Owing to the facts that the government units use a different chart of accounts, they do not provide a full breakdown for some items in the general ledger needed for GFS, and data transmission to the CBBH are not done electronically or in a harmonized manner, which makes the GFS data compilation time-consuming. On the other hand, the mission believes that better cooperation among the institutions and better access to registries for the BHAS and the CBBH will make the compilation processes more efficient and save some resources that can be used to extend GFS. A third TA mission in the framework is planned in spring 2016.