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news 29 Jun 15

Serbia Throws Bosnian Serbs Financial Lifeline

Serbian officials say Serbia may offer financial aid to Republika Srpska to stave off the threat of bankruptcy in the Serbian-dominated entity of Bosnia.

Katarina Panic, Igor Jovanovic
Prijedor, Belgrade
Milorad Dodik, Tomislav Nikolic, Aleksandar Vucic | Photo by Beta

Serbian President Tomislav Nikolic and Prime Minister Aleksandar Vucic said on June 26 that Serbia is ready to give financial help to the Serbian-run entity in Bosnia, which faces a threat of bankruptcy.

The announcement comes as the Republika Srpska authorities are struggling to cover the cost of salaries and pensions.

Some analysts see the offer of aid as a sign of Belgrade's political support for the ruling parties in the entity. Others in Serbia question whether Serbia can afford to give away cash when it is facing its own severe economic problems.

Following a joint meeting of the Serbian and Republika Srpska governments in Belgrade on June 26, Vucic said Serbia was ready to held financially if the Republika Srpska had problems with budget liquidity.

"The people from the RS did not ask for it but if they face problems with budget liquidity, Serbia is ready to help,” Vucic said in Belgrade.

President Nikolic agreed. "Serbia will do everything to help Republika Srpska. My support to the government is unconditional, this is a difficult time, and we have to be united and cooperative," he said. "Let us establish and maintain strong ties and be like a family," Nikolic added.

The Republika Srpska President, Milorad Dodik, said relations between Serbia and Republika Srpska had never been so close, and thanked Serbia for the promise of aid.

Svetlana Cenic, an economist in Republika Srpska, told BIRN that the promise of financial help was designed to shore up the government in the entity, and show it had powerful friends.

"The Republika Srpska authorities are trying to show their power to their own citizens ... thery are sending a message that, yes, we have problems, but mother Serbia will help,” she said.

"This could buy them some time and divert attention from the real pressing problems, such as how they are going to pay for salaries and pensions," Cenic added.

Republika Srpska urgently needs about 150 million euros to avoid bankruptcy, she asserted.

Republika Srpska and the rest of Bosnia and Herzegovina face an imminent liquidity crisis and growing social pressure.

The IMF has offered a new programme, which would provide Bosnia with additional money from September, but on condition that both entities in the country adopt an unpopular labour law by the end of June.  

Without new IMF funding, budgets on almost all levels will dry up as of September, government officials have told BIRN. 

The Republika Srpska government has been working on some alternative options, including a loan from Russia, which Dodik has been trying to secure for more than a year.

However, economists in Serbia are unsure whether Serbia is in any position to offer loans given the difficult situation in its own economy.

"The big issue is whether this offer of help is only daily politics issue or a real possibility. Serbia has no room for direct financing since its own debt is too high," Mahmud Busatlija, from the Belgrade Economic Institute, told BIRN.

Sinisa Pepic, a Banja Luka-based economist, said the Republika Srpska government had to face up to the fact that it must undertake reforms and not to ask for help.

"Republika Srpska had to accept the reality that it can only help itself. The government needs to  revise the budget and make painful cuts in the administration,” Pepic said.

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