Bosnia and Herzegovina
Technical Assistance Report-Government Finance Statistics

This Technical Assistance Report discusses the findings and recommendations made by the IMF mission about improving government finance statistics (GFS) for decision making in the Republic of Srpska (RS), Bosnia and Herzegovina. The future delineation of tasks and responsibilities in the Bosnia and Herzegovina GFS compilation process between the Agency for Statistics of Bosnia and Herzegovina (BHAS), Central Bank of Bosnia and Herzegovina (CBBH), Ministry of Finance RS, and Republic of Srpska Institute of Statistics is still open. The current TA can assist the RS authorities to compile aggregated RS level GFS data. Together with comprehensive methodological explanations, comprehensive process tables, and the free flow of GFS relevant data, this should allow CBBH and BHAS to compile consolidated data for Bosnia and Herzegovina.

Abstract

This Technical Assistance Report discusses the findings and recommendations made by the IMF mission about improving government finance statistics (GFS) for decision making in the Republic of Srpska (RS), Bosnia and Herzegovina. The future delineation of tasks and responsibilities in the Bosnia and Herzegovina GFS compilation process between the Agency for Statistics of Bosnia and Herzegovina (BHAS), Central Bank of Bosnia and Herzegovina (CBBH), Ministry of Finance RS, and Republic of Srpska Institute of Statistics is still open. The current TA can assist the RS authorities to compile aggregated RS level GFS data. Together with comprehensive methodological explanations, comprehensive process tables, and the free flow of GFS relevant data, this should allow CBBH and BHAS to compile consolidated data for Bosnia and Herzegovina.

Executive Report

1. A technical assistance (TA) mission was conducted by Mr. Deon Tanzer, the government finance statistics (GFS) advisor for South East Europe1 during the period February 27–March 1, 2017, to support the Bosnia and Herzegovina authorities, with a specific focus on the Republic of Srpska (RS), in improving GFS for decision making. This mission was conducted within the context of the second phase of the Swiss State Secretariat for Economic Affairs (SECO) GFS capacity building project. The mission met with officials from the Ministry of Finance of the Republic of Srpska (MOF RS) and the Republic of Srpska Institute of Statistics (RZS). The mission would like to thank the staff of the national institutions for their courtesy and willingness to share their knowledge with the mission. It is especially grateful to the staff of the MOF RS for their invaluable assistance in organizing the mission (see Appendix I for the list of officials met during the mission).

2. Reliable GFS are essential for analyzing and evaluating fiscal policy, especially the performance of the general government sector and the broader public sector of any economy, by the authorities, economists, and the broader public. GFS may also be informative to compilers and users of other macroeconomic statistics in understanding the relations between the various sets of macroeconomic statistics, in particular to compilers of the national accounts who may depend on GFS as an input to their work.

3. To this end, the project TA is geared toward the compilation and dissemination of GFS of Bosnia and Herzegovina in accordance with the guidelines of the GovernmentFinanceStatisticsManual2014(GFSM2014) and the EuropeanSystemofNationalandRegionalAccounts2010(ESA2010). The project aims to implement comprehensive reporting to the Government Finance Statistics Yearbook, the IMF-World Bank Quarterly Public Sector Debt (QPSD) statistics database, the ESA 2010 Transmission Programme of Data (ETP), and to fulfill excessive deficit procedure (EDP) reporting requirements.

4. The mission was a follow-up to the October 2016 GFS TA mission, conducted by Mr. Tanzer, and discussed developments since the October 2016 mission. Importantly, the RS cabinet has endorsed the objectives of the SECO-funded GFS project (within the context of the RS Public Finance Management strategy) and therefore supports the TA being provided in this context. An information document on the strategy is being presented to parliament. The mission agreed with the RS authorities to reword the October 2016 mission report’s Appendix I on institutional arrangements, whereby the recommendation suggests an analytical assessment of the current laws, rather than a proposal of changes to the law (Appendix II of this report provides the revised text).

5. The mission met with the Assistant Minister of Finance (and Head of the Accounting and Audit Department) and the Director of the RZS. The mission was informed that the prime responsibility for GFS compilation has been allocated to the RZS, with the MOF operating an important supporting compilation role. This includes the transmission of RS GFS (related) data to the statistics compilers for the consolidated Bosnia and Herzegovina level, namely the Agency for Statistics of Bosnia and Herzegovina (BHAS) and the Central Bank of Bosnia and Herzegovina (CBBH). It is recognized that historic and practical reasons have lead the CBBH to take a significant role in comprehensive GFS compilation for Bosnia and Herzegovina.

6. The future delineation of tasks and responsibilities in the Bosnia and Herzegovina GFS compilation process between the BHAS, CBBH, MOF RS, and RZS is still open. The current SECO-funded GFS TA project aims to assist the RS authorities to develop GFS compilation processes in line with the reporting requirements described in paragraph 3. The current TA can assist the RS authorities to compile aggregated RS level GFS data. Together with comprehensive methodological explanations, comprehensive process tables, and the free flow of GFS relevant data, this should allow CBBH and BHAS compile consolidated data for Bosnia and Herzegovina. Developments that will bring BHAS’ role into more prominence are welcomed, which is also in line with the Eurostat’s recommendations.

7. The mission briefly discussed the implementation of a memorandum of understanding (MOU) both within institutions of the Entity, as well as with the CBBH and BHAS. Currently, a RZS RS Work Program drafted for the period 2013–2017 stipulates the statistical outputs within RS. The Work Program does not address the specific mechanics of agreed tasks and responsibilities (who does what, when) between the RS institutes. The mission shared with the RS authorities a document providing general recommendations on compiling a MOU within the GFS compilation context, that can serve as an inspiration for the drafting of MOUs (Appendix III).

8. Considering that the development of GFS compilation is still in progress, an interim MOU based more on a principal level can be drafted. This can include items concerning the project implementation in itself. In the months preceding the main implementation, lessons learnt can be used to amend and further clarify a final MOU. These lessons learnt approach can also be extended by adopting a step-by-step approach, first by adopting an RS level MOU, and thereafter a Bosnia and Herzegovina level MOU.

9. On strengthening formal arrangements between the institutions at Entities’ level, and the CBBH and BHAS, a way forward could be to establish a working group for coordination, underpinned by a MOU. Initial work to establish such a body could be started during a follow-up mission with the BHAS, CBBH, MOF RS, and RZS, collectively.

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10. The draft object list describing the Work Program presented by the GFS advisor during the October 2016 mission was reviewed in detail. Target dates were identified for specific items in the Work Program. The status of individual items was discussed and included in the work program. The RS authorities will use this Work Program to guide future tasks and objectives during the development of GFS during this project. Future missions will use this Work Program to help determine mission objectives and update the Work Program according to the state of play and mission recommendations.

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11. The mission discussed the current process for reconciling budget execution data on an [annual] basis. Considering that the RS budget execution is recorded on a cash commitment basis, a reconciliation process is complicated. The mission will confer with the regional public financial management advisor on possible methods to ease this process. As a first step, a draft overview depicting the reconciliation of the RS Chart of Accounts is presented in Appendix IV.

12. The mission presented a theoretical model for the reconciliation of budget data and the subsequent step-by-step compilation of GFS data using process tables. The model helps eliminate or minimize statistical discrepancies as an initial step in the compilation process, and subsequently holds this discrepancy constant during the remainder of the compilation process. The model also gives insight into the need for coordinating the estimation of nonfinancial and financial transactions, as well as insights into a logical division of labor for the compilation of GFS transactions. The RS authorities can use the model as a basis for designing their GFS compilation processes. This will ask for new coordination processes and a sequenced division of labor with the MOF (as suppliers of source data and IMF surveillance data), and RZS (compilers of GFS and national accounts) to be developed.

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13. The mission relayed information with the authorities on the sector classification of the Entity RS according to ESA2010.

14. The mission reviewed the bridge between the Chart of Accounts (COA) and the ESA2010 and GFSM classification. The bridge was developed during the June 2016 mission. Upon the recommendations of that mission, the MOF has revised the COA to help further align with ESA 2010 and GFSM 2014 needs. Some groups of items (among others, the recording of bail deposits and refunds, VAT refunds, and health expenditure) will need further review during a follow-up mission due to the complicated nature of their recording. Considering the RS authorities will be consolidating expenditure on public healthcare directly into the budget from 2017 onwards, this will have implications for GFS compilation. It is important for future GFS compilation to signal these changes in dissemination. For instance, a footnote can quantify the changes to the main aggregates with an explanatory note.

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Bosnia and Herzegovina: Technical Assistance Report-Government Finance Statistics
Author: International Monetary Fund. Statistics Dept.