International Information Centre for Balkan Studies

Bosnian Serb Leader Puts Hopes in Russian Loan




The president of Bosnia’s Serb-dominated entity hopes a Russian loan can save Republika Srpska from an imminent liquidity crisis, but concerns have been raised over the economic and political cost.

The Republika Srpska government and Russian officials are to start working on Monday (22.06.2015) on technical details of a loan which Moscow has pledged to provide to Bosnia’s Serb-dominated entity, its President Milorad Dodik has told media. 

“There is complete confidence that Russia will help us financially,” Dodik said on Sunday after his return from the International Economic Forum in Saint Petersburg.  

Dodik’s pledge of Russian financial support comes as Republika Srpska, and the rest of Bosnia and Herzegovina, faces an imminent liquidity crisis and growing social pressure. Yet many local and international officials fear that the Russian loan and its conditions – if it is ever delivered – could make the situation even worse. 

The entire country is facing dire economic and social situation as a result of a prolonged political crisis which has halted all foreign investments and blocked financial support from the International Monetary Fund, the World Bank and the EU. The IMF has offered a new programme, which would provide Bosnia with additional money from September, but under the condition that both the country’s entities adopt an unpopular labour law by the end of June.  

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

The RS government has been working on some alternative options including the loan from Russia, which Dodik has been trying to secure for more than a year. Dodik raised this issue again during his meeting with Russian Foreign Minister Sergey Lavrov in Saint Petersburg on Friday. 

An RS government official told BIRN on Friday that Russia may be willing to provide a loan of up to 700 million euro, but with commercial interest rates and collateral guarantees, most likely in the form of control over the entity’s power company. 

“Without a complete overhaul of the RS administration, economy and public services, this money would be spent quickly and we would soon not be able to repay it,” the official said.      

Some other local and international officials also expressed their concern that the Russian loan would significantly increase Moscow’s presence in Bosnia, and would place the Kremlin in a position to effectively control the RS government.   

The RS government has also been contemplating increasing electricity prices to raise money, but that initiative met angry objections from the public, including many officials who are a part of the ruling coalition led by Dodik’s Alliance of Independent Social Democrats, SNSD. 

RS government officials on Friday met representatives of the RS power company, Elektroprivreda RS, the RS Regulatory Commission for Energy and representatives of the local business community to discuss the issue, but it is believed that no agreement was reached.  

Later on Friday, RS Prime Minister Zeljka Cvijanovic said the government would support the increase of electricity prices by up to four per cent, but stressed that the decision was the responsibility of the Regulatory Commission for Energy. 

Ljubo Glamocic from the Regulatory Commission told media on Friday that a decision has already been made to increase the price of electricity by 8.76 per cent from July 1 - a statement that triggered a new wave of criticism over the weekend. 

“We will use every possible measure to prevent the increase in electricity prices,” Marko Pavic, leader of the Democratic People's Union, DNS, which is also a part of the ruling political bloc in RS, told journalists in Banja Luka on Saturday. 

Pavic said the DNS will seek the dismissal of the RS Regulatory Commission for Energy. 

“They should also have included ethical elements in their decision-making process. In this time of crisis they have made a poor assessment that electricity prices can be increased,” Pavic said. 

Pavic also said that he will demand that the RS government ] order its representative in the RS power company to block the price increase. The final decision on the price increase depends on the RS power company but it they finally decides to raise prices, he said the DNS will seek dismissal of its management as well. 

RS Trade Unions also strongly criticised the government’s plan to increase electricity prices. 

“Any electricity price increase would complicate the difficult economic situation in Republika Srpska… As a consequence, all other costs would grow. It is unacceptable,” the RS Trade Union Association said in a statement on Saturday. 

The opposition bloc Union for Change announced last week that it will call for a special session of the RS National Assembly to discuss the price of electricity and the situation in the RS power company. Elektroprivreda RS officials have said a price increase is necessary to maintain stable supplies to the entire entity.

Katarina Panic, Srecko Latal

Source: http://www.balkaninsight.com/en/article/bosnian-serb-leader-places-last-hope-in-russian-loan





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