B&H Council of Ministers Refused 10 Million Dollar Credit

What Would We, Paupers, Do with Money!?

AIM Sarajevo, 23 March, 1998

After a "shortish", five-month long consideration, the Council of Ministers of B&H, open-handedly refused the offered American credit worth 10 million dolars! This credit arrangement between the US government agency, Commodity Credit Corporation and the Council of Ministers of B&H, referred to delivery of 50 thousand ton of American wheat worth 10 million dollars.

This price included transportation to a port on the Adriatic coast, and B&H was expected to return the credit in the course of 15 years after a five-year "grace" period, all that at an interest rate of one or two per cent a year, without banking or any other guarantees.

The main intention of this credit was, in fact, to enable B&H to get hold of fresh capital in order to meet obligations towards the World Bank which have become due. The contract provided for the wheat to be divided among entities, pursuant the agreement on the level of B&H, and then to be sold at market price to mills on a one-year credit with three-month "grace" period. A possible surplus of money obtained by making money on wheat in this way would have been used for financing development projects in the field of agriculture.

To be on the safe side, control of all these transactions would have been supervised by experts of the US Ministry of Finance, which would have reduced chances for maniputaltions with this credit to a minimum. Negotiations about this credit started back in September last year, and the deadline by which the contract should have been signed about its use was the end of last year. At first, signing of this agreement was planned to take place during the December visit of the American president to Sarajevo, but Bill Clinton has come and gone, and the contract was left to wait for approval of B&H representatives.

At the demand of the foreign ministry and the Council of Ministers of B&H, the deadline for signing the contract was postponed until 1 March this year, but stands in B&H were not coordinated by that date either. The B&H Federation coordinating committee for reconstruction supported signing of this contract in the beginning of February, but despite expectations that it was a fait accompli, like a "cold shower" came the refusal of the Council of Ministers of B&H sent to the Americans.

"We will demand a detailed information about the 10 million credit. The offered credit was rejected without the Federation having even been either asked or informed", said federal prime minister Edhem Bicakcic, after the news about the rejected credit leaked in public.

The explanation which Nikola Grabovac, deputy minister of foreign trade and economic relations of the Council of Ministers of B&H, stated for the public was based on the allegation that all the money made by selling American wheat at the domestic market would be used for paying back the debt to the World Bank. This would mean that the state would pay the debt instead of enterprises which were the ultimate users of foreign loans before the war. Purchasers of these enterprises in the forthcoming privatisation would in this way become owners of the remaining property of these enterprises but by purchasing them they would not inherit their previous obligations.

Such explanation caused vehement reactions of the federal officials. It was one of not at all frequent situations in which representatives of both ruling parties in the B&H Federation, the Party of Democratic Action (SDA) and the Croat Democratic Community (HDZ) appeared with the same stand in relation to the joint institutions of the state of Bosnia & Herzegovina.

"Our obligations towards the World Bank are much higher than the amount of this credit and we will have to pay them back from the budget. This means that there will be less money for other things financed from the budget", said federal prime minister Edhem Bicakcic at the session of the federal government on 19 March during the discussion about reasons why this credit was not approved.

Deputy federal prime minister and minsiter of finance, Drago Bilandzija, shares the opinion that the Council of Minsiters is to blame why the offered credit was not accepted. According to his opinion, the reason why this contract with the USA was not signed is that "individuals in the Council of Ministers are without authorisation doing the job which is in the jurisdiction of the B&H Federation".

And while the deputy minister of foreign trade in the Council of Ministers of B&H, Nikola Grabovac, does not consider this arrangement to be exceptionally favourable, the minister in B&H federal government, Nedeljko Despotovic, has completely the opposite stand.

"This was an attractive arrangement. The goverment of the Federation, through its Coordinating Committee for reconstructionm supported acceptance of this arrangement on 4 February, demanding that the contract be signed by institutions of B&H, but that its effectuation in the part which refers to the Federation be carried out by the federal directorate for stockpiles", said minister Nedeljko Despotovic at the latest session of the federal government.

Obviously, the problem was not just which and whose old debts to the World Bank would be paid back with the money obtained from sale of American wheat on the market of B&H, but also who will "convert" wheat into money - the state or the entity institutions?

Which of these two motives was decisive for the "resolute and historical NO" of the Council of Ministers of B&H to the offer of the USA, it is hard to tell. However logical and in compliance with the "policy of settled accounts" the demand of Nikola Grabovac may be to systematically resolve the qiestion of the so-called non-allocated debts, that is, of the debtors for whom it is hardly probable that they will be capable to move production from the standstill without a powerful financial injection, least of all to earn enough to pay back their debts, it is even clearer that refusal of 10 million dollars of credit has not resolved the problem.

B&H has thus been deprived of the credit, but it has retained the problem. The old debts will have to be returned to the World Bank and who will in the end have to pay for them, the enterprises or the state, that is, all its citizens, for the bankers from the world is not exactly a problem because of which they would rack their brains or spend sleepless nights. What is quite certain is that the Americans have lost patience waiting for the B&H officials to make up their minds whether they need the offered money or not. Since the offered contract has not been accepted, the Americans have drawn the only possible conclusion - that we do not need the money that badly!?

The fact remains that B&H Federation will have to buy wheat somewhere, which will, of course, have to be paid for. At the same time, the debts which have become due will also have to be paid back, both those the ultimate users of which are known and those which are not, and the demands for the money in both cases end up directly or indirectly at the same address, the budget, federal or cantonal, it does not really matter.

Refusal of the offered credit will not contribute to an increased interest of the donors to continue investing in reconstruction of B&H. It would be good if the ultimate damage amounts to the missed 10 million dollars of credit. But, the unresolved relations between the institutions of the entities and those of B&H could in the end cost all the citizens of this country much, much more.

Drazen SIMIC

(AIM, Sarajevo)