Bosnia and Herzegovina: Local Government Debt

Abstract

Fiscal decentralisation in Bosnia and Herzegovina is characterised by a complex post-conflict constitutional organisation consisting of two entities and one self-governing unit. The decentralisation process and the position of local government units in both entities over the past 20 years can be divided into three phases. Although the entities are constitutionally organised differently, the assignment of expenditures to local government units is similar in each one and did not change over time. At the same time, the allocation of revenues to local government units has improved significantly. However, since indirect tax revenues take the highest share of their total revenues in both entities, with the outbreak of global financial crisis these revenues became volatile, which triggered a rise in local public debts in both entities.