INFLUENCE OF THE POLICIES OF INTERNATIONAL FINANCIAL INSTITUTIONS ON THE ECONOMIC POSITION OF THE REPUBLIC OF SRPSKA

Abstract

Small, open economies, such as the economy of the Republic of Srpska, are highly dependent on developments in the international economic environment. The unfavorable economic structure inherited from the previous socialist system and inadequately implemented and unfinished transition process into the market economy, increase inefficiencies in the allocation of available resources. If the significant political and social burdens of the previous war period, still felt in the Republic of Srpska, are added, it is clear that we need very “strong” structural reforms that would lead to the significant economic growth.

The latest economic crisis has shown that small economies are very vulnerable to disturbances of global economic trends. With the intention of preserving the achieved level of budgetary benefits, in 2009 Republic of Srpska “entered” into an arrangement with the International Monetary Fund, which to this day, with shorter interruptions, is almost entirely a framework for all policies of the Republic of Srpska.

Therefore, the intention of this paper was to analyse the in?uence of the policies of the international financial institutions, particularly the IMF, which is the framework for the policies of other international financial institutions as well, on the economic position of the Republic of Srpska. In this regard, we first investigated the macroeconomic trends in the Republic of Srpska after the economic crisis and then trends of fiscal aggregates. In the second part, we analysed the policies of international financial institutions, primarily the International Monetary Fund, that were agreed with the Republic of Srpska, while in the third part, we tried to demonstrate the interconnection of policies of the international financial institutions with the trends of macroeconomic and fiscal aggregates in the analysed period.

Summing up the results of our research, we concluded that economic growth is still not sufficient to significantly a?ect fiscal trends and the e?ects of structural reforms are insufficient to stop negative trends in terms of the current account deficit and increasing indebtedness. The analysis of quantitative correlation between the macroeconomic and fiscal variables with the policies of the IMF brought us to the conclusion that the arrangements with the IMF have not had statistically significant in?uence on any of the analysed variables. Blocking arrangement by certain levels of government has disabled full e?ects of the programs, as the implementation of measures has been significantly delayed in most cases, while the amount of funds allocated by the IMF by years is negligible, compared to the total financing needs.