Financial fallout: Bosnia forced to cover RS’s arbitration debts

The issue arose when the Government of Republika Srpska (RS) failed to honour a concession agreement to construct hydroelectric plants with Viadukt. Muhamed Hasanovic, Deputy Minister of Finance and Treasury of BiH commented on the case, highlighting that BiH faces a total of two billion Bosnian marks (approximately €1 billion) in arbitration-related debts, as Viadukt is not the only case.

Hasanovic explained that the debt was incurred by RS and should not be paid by BiH, although the arbitration process has identified BiH as liable. He emphasized the urgency of resolving the issue to ensure the continued functioning of BHANSA and prevent the seizure of Central Bank properties.

During a Council of Ministers meeting, it was proposed that the debt be settled through BiH's Fiscal Council, with the Federation of BiH covering a significant portion. However, Prime Minister Nermin Niksic opposed this plan and announced a veto at the Fiscal Council meeting scheduled for today.

Hasanovic criticized the proposal, stating that RS should take responsibility for the debt, as it was acknowledged and incurred under a concession agreement signed in 2017 by Zeljka Cvijanovic, then Prime Minister of RS. He argued that BiH institutions had no involvement in the agreement and should not bear the financial burden.

The Chair of the Council of Ministers suggested budget adjustments to allocate funds for debt repayment, but Hasanovic pointed out that BiH is operating under temporary financing and lacks a formal budget. He proposed using profits from the Central Bank of BiH as a potential solution, though this approach also faces legal and operational challenges.

Hasanovic warned that RS's strategy appears to be aimed at financially undermining BiH, jeopardizing state institutions, and creating dysfunctionality. He stressed the importance of holding RS accountable for its actions and ensuring the sustainability of BiH's institutions.

The arbitration case with Viadukt is just one of several disputes, with others involving Nevesinje, Ugljevik, and Gacko, totalling nearly €1 billion in liabilities. Hasanovic cautioned that if Viadukt's claim is enforced, additional arbitration rulings could follow, further straining BiH's finances.