ECONOMIC MANAGEMENT STRUCTURAL ADJUSTMENT CREDIT

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The Economic Management Structural Adjustment Credit (EMSAC) for Bosnia-Herzegovina supports a fiscal policy reform program for the transition from post-conflict aid-dependency to self-sustained growth. The two project components support (1) reducing the excess burden of government in the economy while increasing expenditure efficiency, and (2) improving financial and budgetary management in the public sector. Expected benefits are to: enhance public spending efficiency and ensure macro-fiscal stability by good management of public resources; accommodate the medium-term macro-economic program and provide room for a reduction in the tax and contributions; contain wages in the general government sector; improve allocative efficiency of spending; clarify intergovernmental revenue and expenditure assignments; and increase transparency and accountability in government transactions. Among the risks faced by the credit are: The possibility of the authorities either delaying the implementation of some measures or even reversing their commitment to some parts of the Program; weak administrative capacity to implement and monitor the Program; and macroeconomic risk arising from the country's still fragile position. The credit is to be released in two tranches.