Public Expenditure Crisis Development Policy Loan

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The objectives of the First Programmatic Public Expenditure Development Policy Loan (DPL) Program for Bosnia and Herzegovina (BH) are: (i) to increase social assistance to the poor, while reducing the fiscal deficit and creating fiscal space for poverty-reducing growth; (ii) to improve the structure and efficiency of public expenditures; and (iii) to reduce social contribution rates and pressures on private sector wages from faster wage growth in the public sector, thereby enhancing private sector competitiveness. The program supports the authorities' public expenditure reform efforts, with blended loans and credits. The first loan and credit will be for an amount equivalent to US$111 million, of which US$66 million is International Development Association (IDA) credit and US$45 million is International Bank for Reconstruction and Development (IBRD) loan. The IDA credit and IBRD loan will be on-lent by the Ministry of Finance and Treasury of BH to each entity by way of subsidiary loan agreements (for the IBRD loan) and subsidiary financing agreements (for the IDA credit) and the signing of which will constitute additional effectiveness conditions. The DPL supports the Country Partnership Strategy (CPS) including the goals of: a) reducing the burden of Government on the economy and strengthening fiscal coordination; and b) improving the targeting of social benefits, both of which have taken on greater importance in the context of the unfolding global economic crisis.