Bosnia and Herzegovina

Bosnia and Herzegovina (BiH) declared its independence from the former Yugoslavia on 1 March 1992. The declaration of independence gave rise to an armed conflict. In 1995, a peace agreement was reached with the signature of the Dayton Peace Accords in Paris. The country consists of two entities – the Federation BiH (FBiH) and the Republika Srpska (RS) – and the Brcko District, a self-governing administrative unit. The FBiH is further divided into ten cantons, which have their own Constitution, and are further divided into 84 municipalities. The RS is subdivided into 63 municipalities.

BiH was identified as a potential candidate for EU membership during the Thessaloniki European Council summit in June 2003. It applied for EU membership in February 2016. Although accession to EU is among the few common priorities for the country, reforms are slow and the Opinion on Bosnia and Herzegovina’s EU membership application indicated that the country is the least prepared among its Western Balkans neighbours.

The current system of public sector accounting is not aligned with EU standards. Overall, the quality of fiscal governance is low, which frequently results in delaying much-needed public investment. Public finances are suffering from substantial spending inefficiencies and a poor targeting for development priorities. Collection of revenues and fees is also facing many challenges, particularly at the local level. These are aggravated by ineffective and non-transparent financial management and control systems at all government levels.

Public Finance for Development in BiH

SINCE: 2020

In 2020 under the Resource Mobilization Facility, there was a supported project implemented by the UNDP Bosnia and Herzegovina, which aimed to identify energy-saving public lighting solutions in 12 municipalities in BiH. The joint effort in the field of private sector engagement into development cooperation brought about a valuable experience leading to a start of cooperation in the field of public finance.

ACTIVITIES: Programme activities in BiH seek to support timely advancement for public finance system stakeholder capacities in three intervention areas.

BiH workshop, July 2019

I. Development Finance Assessment

A Development Finance Assessment (DFA) needs to be conducted in order to support SDG financing, with focus on mapping the finance flows and financing landscape (external, domestic, public and private). Additionally, rapid public expenditure reviews across administrative levels is necessary to provide an overview of existing public finance channelled towards sustainable development priorities. In this context, the following activities are envisaged:

  • Prepare a tailored methodological approach for conducting the DFA;
  • Provide a training on DFA for ministries of finance/line ministries;
  • Conduct basic DFA and public expenditure reviews against the SDGs Framework in Bosnia and Herzegovina, with focus on priority sectors identified in need of more catalytic support;
  • Prepare the recommendations on financing solutions.

II. Linking financing with development results

The new regulatory framework on strategic planning requires to integrate SDG priorities into the development strategies that are to be operationalized through governments’ three-year and annual work plans aligned budgets. In this context, the following activities are envisaged:

  • Review regulatory and methodological requirements against existing practices and formulate recommendations;
  • Prepare guidelines for practitioners;
  • Design and deliver pilot training programme;
  • Support replication of the training programme via the FBIH Civil Service Agency (responsible for training of civil servants).

III. Strengthening of internal controls and value for money approach in local governments

Good governance requires well-functioning, transparent and accountable local governments, for which systemic internal controls and value for money thinking are main preconditions. In this context, the following activities are envisaged:

  • Assess the local government internal controls regulatory and methodological framework to identify compliance gaps with the existing internal controls legal framework.
  • Conduct an assessment of the internal controls (including internal audit) practice and application of the existing frameworks and procedures.
  • Develop findings (shortcomings and deficiencies, as well as good practices/innovative approaches) and recommendations;
  • Prepare a pool of experts for internal controls and value for money;
  • Deliver the training programme to selected local governments.

The Government of Republika Srpska has initiated the development of the 2024-2030 Sustainable Development Strategy, with a strong emphasis on aligning with the Sustainable Development Goals and the Agenda 2030 as well as addressing gender and other types of inequalities. This forward-looking initiative has received invaluable support from the Slovak government and the UNDP in Bosnia and Herzegovina, and we are very grateful for it.

Nemanja Kovačević

Assistant Minister for European Integration and International Cooperation - Bosnia and Herzegovina