Government of #FBiH borrows 360 million KM by selling treasury bills, experts warn of Greek scenario

The government of the Federation of BiH will, according to the budget plan, charge 360 million KM through short-term securities, ie through the sale of treasury bills. This is the cheapest method of collecting funds for financing expenditures determined by the Budget of the Federation of BiH, which, according to experts, sooner or later, due to its unsustainability, will lead to the collapse of the entire system.

At the session held last week, the Government of the FBiH issued a decision on borrowing through the issue of the Federal Treasury bills, in a nominal amount of up to 100 million KM. The decision was published in the Official Gazette of the Federation of BiH, and the sale of treasury bills will be made through the auction on the Sarajevo Stock Exchange (SASE) by the method of multiple prices. The Government of the Federation of Bosnia and Herzegovina has to give consent for each issue individually, and it is planned that in the year 2017, the sale of treasury bills will amount to a total of 360 million KM, exclusively for the repayment of previous debts.

Goran Miracic, adviser to the federal prime minister, told that the sale of treasury bills is currently the cheapest way of indebtedness, given that we have the absence of international funding. "Even when we have international borrowing, treasury bills, or securities of up to one year, are the cheapest source of budget financing. But this is only about the liquidity of the budget, because the maturity is up to 12 months. Bonds are two-year, three-year, five-year, but they are not foreseen to finance the budget for this year, "said Miraščić.

He added that the sustainability of funding by selling treasury bills this year is close to zero effect, which means that what is being broadcast again returns within a year. "That maturity that was in the past year of treasuries is coming back this year. Out of 360 million, which is envisaged by the broadcasting budget this year, it is all for the return of the previous debt. So, the neutral effect is, "Miraščić is categorical. According to Mirasic, in case of lack of funds planned through the tranche of the International Monetary Fund, the liquidity of the federal budget will not be compromised. "When it comes to the liquidity of the Federation of BiH, there is no problem," said Miraščić.

Economic analyst Zoran Pavlovic points out that the current mode of borrowing can lead to liquidity problems by the Government of the Federation of BiH.

"Our entity governments are resolving this by practically discharging obligations, that is, they carry out the transfer of unpaid bills year after year, which should not be done because it is the creation of a budget deficit. On the other hand, they have a bunch of invoices that they have not paid and then are practically financed by suppliers who expect to get their money for what they have delivered, and governments do not, as a rule, pay them. Governments are kept by financiers, banks, insurance companies, but do not pay their suppliers. In this way, they create an illusion that everything is neat, but not really, "explains Pavlovic.

Pavlovic explains that the decision of the Government of the FBiH on borrowing through the issuance of Treasury bills of the Federation, in a nominal amount of up to 100 million KM, is short-term borrowing, where 90 days are collected.
"At a given moment, the Government has the right to borrow from treasury bills, which are short-term indebtedness. They are interesting to banks because they have available deposits, with which they do not know what to do, so that every form of placement is favorable, especially if they are entities of the entities, because they relatively regularly settle their obligations. As long as your client regularly reimburses funds, there is not much question about whether he is credible and how much. At the moment when the first problem arises or the first suspicion is that the funds can not be settled, then the financiers will stop the placement, "Pavlovic said.

It notes that the entity governments at the moment have come to a very ungrateful position, which is a consequence of their riches.
"When in 2006 the VAT inflow began to arrive at entity budgets, then elected officials in power felt very rich and began to behave very sparingly. These costs of various projects, investments, and which need and should not, have led to the initiation of a borrowing cycle with international financial institutions and other domestic suppliers. At present, the situation is such that Republika Srpska has to return 750 million this year, and the Federation of BiH about 1,5 billion KM. These are so many that the launch of the business cycle is the only way out, because this will collapse as a tower of cards, "economic analyst Zoran Pavlovic concluded.

• 29 Jun, 2017
• 1874 views