BEAUTIFUL DREAMS ON CREDIT

Power of Money

AIM Sarajevo, 26 June, 1997

"The entities will be able to borrow for themselves, without guarantees of the state. Direct borrowing from abroad by the entities has the status of borrowing by local authorities. It will also be permitted to give loans to public institutions such as the cantons and public enterprises, and it will not be necessary to involve the state or the entity in such deals", it is stated in the latest study of the World Bank, titled "B&H from Revival to Sustainable Growth".

    Experts of the World Bank refer to provisions in the

draft law on foreign debt which was officially adopted a few days ago by the parliament of B&H, but not yet publicized.

Such a solution can hardly fit into the provisions of the Dayton Constitution of B&H, which, it is true, states that the entities can sign agreements with states and international organizations, but with approval of the B&H parliament.

The logic of the international experts was simple - the money is in the cash-boxes of the entities anyway, and the budget of B&H depends on whether and how much charity the entities will grant to it. That is why it is probably more certain for the creditors that they will be able to collect debts from the entities than from the state of B&H. Of course, this refers to future loans, while the situation is somewhat different when it comes to the inherited debt. The inherited prewar debt, being the debt of the state of B&H, was determined as the oldest and the first to be paid back.

    Therefore, the main debtor for the old creditors whose

money was "squandered" during the seventies and in the beginning of the eighties, is the state of B&H, and they are interested how the entities will come to terms about paying it back. The logical result of this stance is that in case the debts which are due are not paid back, all monetary transactions with B&H would be terminated by the old and simultaneously the new creditors - the World Bank, the International Monetary Fund and other international financial organizations. In that case, money would be stopped for both entities in B&H regardless of who is guilty for the failure to pay.

What it is like in practice, it was possible to see in the past few days when the instalment of eight million dollars was due to be paid to the World Bank. The B&H Federation provided its part of 4.2 million dollars in time, while Republica Srpska failed to give its part amounting to 3.8 million, with the explanation that it simply had not the money. When it became certain that the World Bank would stick to its rules and stop all payments for reconstruction of B&H, both for the planned and the projects already in progress, Republica Srpska "generously" agreed to "allow" the Federation to pay its part, too.

One of the reasons why the world experts decided to allow the entities and even the cantons to take loans directly is to avoid situations in which those who regularly meet their obligations become hostages of those who fail to pay their part of a debt. This is also probably the reason for accepting such provisions by representatives of the B&H Federation who wished to have an alternative channel for receiving financial aid from abroad, if the situation such as the one which occurred during the war would be repeated, that is in case RS continued to reject and condition adoption of loans for faster reconstruction.

On the other hand, representatives of RS have nothing against this solution. Indeed, each and every move which contributes to reduction of the already symbolic competencies of joint institutions of B&H, and practically gives the entities prerogatives of sovereign states, may count on maximum of their support. Since it is hardly probable that anything will change in the foreseeable future in strategic political determinants of the current authorities in RS, this possibility is also a spare solution for them.

Since the USA as the only super-power and the key player in the Balkan political field manifested readiness to use economic pressure and money for reconstruction in order to force all signatories of the Dayton accords to carry out the undertaken obligations, it is very likely that RS will take the brunt of the threat. Among other powerful players from the international community, there are supporters of the thesis that withholding aid and economic blockade is not the most efficient means for achieving the desired goals. In that case, the possibility of direct granting loans to entities would be the best opportunity for them to check their ideas in practice, in other words, to "buy" arrest of war criminals, return of refugees and operation of joint institutions of B&H by extending new credits.

The principle according to which everyone will have to pay back what he spent is undisputable, but making it possible to the local governments to take loans directly without the approval of the parliament of B&H seriously questions the proclaimed international sovereignty of B&H as a state. Such a possibility of borrowing money from international financial organizations is absolutely unacceptable in our conditions, especially because these organizations insist on nationally recognized states as their "clients".

When speaking of contracting debts in commercial banks around the world, which take the entire risk of their business transactions, since its their money, there is no reason to ban them to extend credits to anyone they see fit. But, when one knows how these banks run their business, it is hard to believe that any serious bank would extend a loan to any "local government", only upon its word and without multiple guarantees. The situation is the same with enterprises, because according to the assessment of the World Bank, "in the next few years, the non-governmental sector will be able to take loans from abroad only with guarantees of the state".

B&H can best be reintegrated by means of money, but it can also be definitely divided by means of money. What the power of money will be used for depends on those who create international financial trends and decide where to directing them. Politics and economy walk hand in hand.

Drazen SIMIC

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