The Government of Republic of Srpska approved today during its 97th session, the Budget Proposal for 2025, the total framework of which amounts to BAM 6,070,000,000 which is 260 million or 4.5% more than the Budget Rebalance for 2024.

The budget proposal projects total budget revenues and receipts for non-financial assets in 2025 to amount to 5,086,100,000 which represents an increase of 313.1 million.

Tax revenues for 2025 will amount to 4,731,000,000 and will be higher by 7.5% or 328.8 million more compared to this year's Rebalance.

According to the Budget Proposal, projected revenues from profit tax in 2025 will be higher by 9.1% compared to the funds from the 2024 Budget Rebalance and will amount to 491.7 million,  while income tax is planned to increase by 9.3% compared to the Rebalance and will amount to 348.5 million. Revenues from indirect taxes are projected to be 6.5% higher compared to the funds planned in the Rebalance, which represents an increase of 135.1 million and will amount to BAM 2,223,400,000.

Non-tax revenues in the Budget Proposal amount to 354.4 million and have increased by 11% or 35.2 million compared to the 2024 Budget.

Revenues based on contributions for pension and disability insurance in the Budget Proposal of the Republic of Srpska for 2025 amount to 1,646,500,000 which is 122.4 million or 8% more than the revenues projected in this year’s rebalance.

Total budget expenditures and expenditures for non-financial assets in 2025 projected in the Budget Proposal for 2025 amount to BAM 5,184,500,000.

On the expenditure side of the budget, the amount planned for pension payments is BAM 1,946,000,000 and this amount is planned according to the previous trends of pension beneficiaries.

Expenditures for personal income of employees proposed by the Budget amount to 1,197,400,000, which is 3.6% higher than in the Rebalance or 41.5 million KM.

Social security transfers paid from the Budget, according to this proposal will amount to 531.6 million in 2025 and are 2.5% higher or 13.2 million.

The most significant allocations relate to remittances for veterans' allowance in the amount of 225.7 million, family disability benefits in the amount of 94.8 million, civilian disability benefits in the amount of 6.8 million while capital remittances for housing care for the families of deceased soldiers and invalids of war are planned in the amount of 5,000,000.

In the subsidies position, the most significant allocations are for incentives for development of agriculture and rural areas in the amount of 180 million, while incentives for increasing workers' salaries will amount to 10 million.

Grants have been reduced by 9.3% in the budget proposal compared to the 2024 Budget Rebalance. The most significant allocations are planned within the Ministry of Scientific and Technological Development and Higher Education and the Ministry of Health and Social Welfare.

In the item of transfers, which has increased by 97 million or 32.6% in the 2025 Budget compared to the Supplementary Budget, 142.5 million will be transferred to the Health Insurance Fund based on the Health Insurance Law, 79.6 million for special medicines program, and 14.5 million for health insurance of veterans. A transfer of 18.5 million is planned for personal disability benefits.

A transfer of 3.5 million is also planned for in vitro fertilization and funds in the amount of 7 million for diagnostic procedures (NIPT test).

In accordance with the Law on Social Protection, a transfer of 47 million is planned for municipalities and cities in the Republicn of Srpska for the right to financial assistance and the right to an allowance for assistance and care of another person, as well as health insurance for the beneficiaries of these rights and financing the right to support in equalizing the opportunities of children and youth with development disabilities.

In the transfer position, 45 million is also planned for financing the rights from the Law on Child Protection, while another 900,000 is planned for financing the right to a pronatal allowance that a mother receives for every third and fourth child, regardless of the family's financial status.

Debt repayment expenditures in the 2025 Budget Proposal amount to 815.9 million, which represents a decrease of 10.7 million, or 1.3% less than in the 2024 Budget Rebalance.

The 2024 Budget Proposal plans a budget deficit of 98.4 million, which is 8% less than the deficit planned in the 2024 Budget Rebalance.

At today's session, the Government established the Proposal for the Economic Reform Program of the Republic of Srpska for the period 2025-2027, which, like the Budget, will be urgently submitted for consideration to the National Assembly of the Republic of Srpska.

According to this act, the projected economic growth rates of the Republic of Srpska for 2025, 2026 and 2027 are 2.8%, 3.1% and 3.3% respectively.

In the period 2025–2027, the initiatives and reform processes that started in the previous period will continue, bearing in mind that these are complex and extensive multi-year reform processes, the implementation of which will contribute to the realization of the main goals set by the Work Program of the Government of the Republika Srpska, in key reform areas.

Structural reforms are organized within three areas, which correspond to the defined reform pillars of the Government: competitiveness, sustainability and resilience and human capital and social policies.

Within the defined areas, seven structural reforms have been proposed and within those 22 reform measures.

These measures are aimed at improving the competitiveness of the economy by supporting technological development in various areas, improvements of business conditions, modernization of payment transactions, improvements in the fields of agriculture, forestry and water management and more efficient system of management of scientific research and innovation potential.

Structural reforms include increasing the efficiency of public enterprises and their restructuring, energy and green transition, accelerated digital transformation, modernization and renovation of transport infrastructure in accordance with the goals of the Green Agenda.

It is also planned to increase employment by aligning education and the labor market and improving the quality and efficiency of institutional mechanisms for provision of social and health care services.

The basis for development of this important document is the Work Program of the Government of Republic of Srpska, the Guidelines of the European Commission and the contribution of social partners: the Chamber of Commerce, the Union of Employers and Confederation of Trade Unions, as well as adopted strategic documents of Republika Srpska.

During the 97th session of the Government of Republika Srpska, the Draft Law on the Execution of the Budget of Republika Srpska for 2025 was also established, which prescribes the method of using the revenues of budget users and the own revenues of individual budget users. This act, among other things, stipulates that priority in payments is given to pensions and other rights from pension and disability insurance, then family, personal and civil disability benefits, and then taxes and contributions on personal income of employees, net personal income of employees, other rights from veterans' and disabled protection, obligations to suppliers, and the return of public revenues based on acts of competent authorities and other obligations.

The Government has also established the Draft Law on Amendments to the Law on Budget System of the Republic of Srpska, which regulates affiliation and distribution of revenues from indirect and direct taxes, as well as non-tax revenues in the Republika Srpska.

At the initiative of the Association of Municipalities and Cities of Republika Srpska, and with the aim of achieving financial stability and development of underdeveloped and extremely underdeveloped local self-government units, a measure has been proposed to reduce the amount of indirect tax revenue which is attributed to developed by a certain amount in the next three years and to direct that amount of funds, in accordance with the criteria proposed by this law, to the development of underdeveloped local self-government units.

This Law also proposes the distribution of a portion of the income tax revenue as an exception to the City of East Sarajevo, as the only local government unit in the Republic of Srpska that, unlike others, has no possibility of introducing or increasing its own income.

Due to specific nature of the financing structure of the City of East Sarajevo, it is proposed to allocate income from income tax paid by companies on the territory of the City of East Sarajevo in the ratio of 85:15 to the Budget of the Republic of Srpska.

Based on the estimated generation of indirect tax revenue for local government units in 2025, the expected amount of funds for distribution to local government units with fewer than 50,000 inhabitants will amount to approximately BAM 9 million. This means that local government units that generate very low revenues would receive a total of about 5.9 million, while the rest would receive 3.1 million, except for three cities with between 50,000 and 100,000 inhabitants.

The Government of the Republika Srpska adopted the Draft Law on Changes and Amendments to the Income Tax Law at its 97th session. The reasons for adopting this law are relted to the need to raise the threshold for entering the small entrepreneur census from BAM 50,000 to 100,000, equalizing it with the threshold for mandatory entry into the indirect taxation system, as well as with the threshold for the lump sum in the Federation of Bosnia and Herzegovina.

Based on the Analysis of the Taxation Policy for Self-Employment, conducted by the Ministry of Finance, it was concluded that there are justified reasons to expand the number of self-employment activities that by their nature imply provision of special professional or intellectual services, and to tax them according to the actual income earned, that is, according to economic power.

Taxation according to the economic power, which is prescribed by the Constitution of the Republic of Srpska, is taxed on all regular entrepreneurs and legal entities that perform the same activities (10% on the basis representing the difference between income and expenses).

In the proposed law, in parallel with satisfying the requirements for raising the threshold for a small entrepreneurs from BAM 50,000 to 100,000, the minimum amount of tax that a small entrepreneur is obliged to pay has also been raised, from BAM 600 to 1,200, with the exception of smallest entrepreneurs whose annual income does not exceed 50,000, the existing principle of the lowest tax amount of BAM 600 has been retained.

According to this proposal, if a taxpayer's status of a small entrepreneur shall be revoked in 2024 solely because he earned income above BAM 50,000, he can immediately request small entrepreneur status in 2025.

This legal solution proposes expanding the number of independent occupations that are, by their nature, special professional or intellectual services and the same person cannot submit a request for tax payment as a small entrepreneur.

At its 97th session, the Government of the Republic of Srpska also adopted the Draft Law on Amendments and Supplements to the Law on Contributions. The reasons for adopting this law are contained in the need for a more correct determination of contributions, taking into account fairness and the principle of economic strength of the taxpayer.

This law specifies that the person liable for contributions is, among others, a person who carries out entrepreneurial activity or self-employment as their main occupation, provided that they are not a beneficiary of the right to a pension. Also, the terms entrepreneurial activity and self-employment are aligned with the meaning of these terms proposed in the amendments to the Income Tax Law, which are submitted to the National Assembly for adoption together with this law.

In addition to the above, it is stipulated that the minimum contribution base for persons who carry out independent activities shall gradually increase from the current 60% of the average gross salary in the Republic to 80% of the average gross salary in the Republic, so that in 2025 the contribution base will be 70%, and from 1 January 2026 it will be 80% of the average gross salary in the Republic.

Also, the obligation to pay contributions for pension and disability insurance is established for persons who earn income from self-employment and are beneficiaries of the right to a pension, and for persons who perform self-employment as a supplementary activity, on a basis of 30% of the average gross salary in the Republic. These persons have so far been entirely exempt from the obligation to pay contributions, however, due to the need to prevent unfair competition or substantially reduce it, taking into account fairness and the principle of the economic strength of the taxpayer, an obligation to pay minimum contributions is introduced for these persons.

It should be noted that persons who earn income based on a contract for additional work pay contributions for pension and disability insurance on the basis of the entire gross remuneration earned based on such engagement, so the introduced base for entrepreneurs who perform additional activities is still more favorable than for additional work.

On the other hand, persons who perform activities as additional activities are still excluded from the obligation to pay contributions, due to the fact that these are the persons who cannot perform this activity through personal work, but exclusively through employed workers.

Persons who exercise the right to a pension from the Pension and Disability Insurance Fund of the Republic of Srpska are exempt from paying contributions if they earn income for work within humanitarian organizations or organizations that provide social assistance to persons in need.

At today's Government session, the Proposal for a Decision on long-term borrowing of the Republic of Srpska for 2025, which is planned in the 2025 Budget as a receipt from borrowing, was also approved. This decision defnes long-term borrowing of the Republic of Srpska for 2025 in the maximum amount of up to BAM 862,000,000.

The method and sources of securing these funds will be: issuance of long-term debt securities in   domestic finance market, credit borrowing from domestic creditors, loans from international creditors, i.e. lenders, international organizations, international financial institutions and foreign governments, issuance of bonds in the international finance market.

This decision defines indicative terms of borrowing in domestic and international finance markets, as well as borrowing from international creditors, i.e. lenders, international organizations, international financial institutions and foreign governments, and the final terms will be determined during negotiations and more precisely defined by individual decisions on borrowing by the Government of the Republic of Srpska.

The Government also established the Proposal of a Decision on short-term borrowing through the issuance of treasury bills for 2025, in the maximum amount of up to 8% of the revenues generated in the previous fiscal year. Borrowing based on issued treasury bills, during the budget year, can be carried out at an interest rate of the maximum relevant Euribor +1.5%, and with a maturity of treasury bills of up to one year.

During the 97th session of the Government, a Proposal of a Decision on the amount of guarantees that can be issued by the Republic of Srpska in 2025 was also determined. This decision approves the issuance of guarantees by the Republic of Srpska for debts in 2025 up to the amount of BAM 800,000,000, provided that the total exposure of the Republika Srpska under issued guarantees cannot exceed the legally defined limit, which is 15% of the gross domestic product in that year.

Based on the procedures, analyses and assessments performed, the Government will make individual decisions on the issuance of guarantees for debts that are determined by analysis and assessment to be justified and that meet the conditions prescribed by valid legal regulations in the Republic of Srpska.

In accordance with this decision, it is planned to issue guarantees by the Republika Srpska for debts in the transport, energy, trade and tourism sectors, environmental protection, healthcare and other local government entities and public sector institutions.

The Government approved the Draft Law amending the Law on Development of Small and Medium-sized Enterprises, which is scheduled for adoption by the Work Program of the National Assembly of the Republika Srpska for 2024. The reasons for adopting this law are: more fully prescribing the purpose and purpose of incentive funds allocated in the field of small and medium-sized enterprises and more precisely determining the beneficiaries of these funds, harmonizing the methods of adopting strategic documents and preparing reports with regulations regarding strategic planning, and harmonizing the terms and names in the law in accordance with the legislation of the Republic of Srpska (terms of women's entrepreneurship, social entrepreneurship, names of ministries and chambers).

Regulations in the field of strategic planning stipulate that the Government of Republic of Srpska shall adopt sectoral strategies, and this law amends the procedure and the competent authority for adopting the Strategy for Development of Small and Medium-sized Enterprises in the Republic of Srpska, as a comprehensive development document in this area. In the part of the Law regulating the procedure for granting incentives for the development of small and medium-sized enterprises, the types of incentives, their beneficiaries and the formation of committees for the allocation of funds are better specified. In this way, the basis for implementing the procedures for granting incentives in this area is further improved. In addition to essential changes and innovations, this law also formally harmonizes the names of bodies and organizations that have activities and responsibilities in the field of small and medium-sized enterprises, and more precisely regulates the definitions of certain terms in this area.

The Government of the Republic of Srpska has also adopted a Draft Law on Amendments to the Law on Foreign Investments.

The reasons for adopting amendments to this law are primarily related to the need to harmonize the provisions of the current law with provisions of the Law on Republic Administration, according to which the Ministry of Economy and Entrepreneurship has taken over the tasks related to foreign investments, which until then were under the jurisdiction of the Ministry of Economic Relations and Regional Cooperation. At the same time, it is being harmonized with the provisions of the regulations governing strategic planning. In addition to the above, the reasons for the amendments also lie in the need to improve certain solutions, taking into account the practice in the implementation of the Law, especially in the segment of cooperation between the entity level and local self-government units with the aim of attracting and encouraging investment in the Republic of Srpska, as well as the need to refine certain provisions in a technical sense.

The Government adopted the Information on implementation of the procedure for granting incentives for increasing workers' salaries with the effects of the granted incentives for the reporting period of January - June 2024. The Law on Incentives in the Economy of the Republika Srpska and the Regulation on the Procedure for Granting Incentives for Increasing Workers' Salaries regulate the procedure for granting incentives. In accordance with the aforementioned legal solutions, the Ministry in cooperation with the Tax Administration, carried out the procedure for granting incentives for the tenth calculation period, from janury 1 to 30 June 2024, 1,465 business entities employing 67,014 workers applied for granting of incentives for the tenth calculation period. The incentive in the tenth accounting period was approved in the amount of 12.91 million for 1,320 business entities that increased the salary of 38,661 workers. The largest amount of incentive for increasing the salary of workers was approved to business entities from the manufacturing industry in total amount of 4.33 million (or 33.55%). The most significant effects of the incentive in the tenth calculation period are:

-  increase in the average salary of workers by 15.03% compared to the initial salary for business entities that have exercised the right to the incentive or in absolute terms by 79.18 million,

- increase in the number of employees for 496 or 0.74% in June 2024 compared to January 2024

- increase in the amount of incentive by 22.66% compared to the previous period.

Also, in addition to other Government activities, this measure contributed to the increase in the average salary, an increase in the amount of contributions paid and continuity in the payment of the increased salary. In all ten calculation periods (from July 2019 to June 2024), incentives were approved in the total amount of 85.69 million, with 6,940 submitted requests from business entities and 92.4% being approved. The beneficiaries of the incentives were 2,069 different business entities that increased salaries for 73,727 workers. Given that previous analyses of the effects of granting incentives for salary increases indicate positive trends, we believe that the granted incentive achieved adequate effects and justified expected results.   

The Government of the Republic of Srpska approved following the urgent procedure, the Draft Law on Amendments to the Law on Salaries of Employees in Primary and Secondary Schools and Pupils Homes and the Draft Law on Amendments to the Law on Salaries of Employees in the Sector of Culture of the Republic of Srpska.

The reason for adopting these laws is to harmonize the salary coefficients of employees with a higher professional qualification in the field of education and culture who have a salary coefficient lower than the salary coefficient of the fifth salary group defined by the law regulating the salaries of employees in administrative bodies, with the aim of improving the financial situation of this category of workers.

Considering the fact that a large number of workers with higher education are employed in educational and cultural institutions in the Republika Srpska, with the aim of improving the material situation and living conditions of this category of workers, an increase in the salaries of employees with higher education in the amount of up to BAM 100 was initiated. Also, the names of certain jobs were changed in order to align them with the applicable legal and by-laws, all in order to improve the text of the proposed laws.

The amendments to these laws represent another measure of the Government of the Republika Srpska that contribute to economic growth and an increase in workers' salaries, as well as to improving the economic and social position of employees in primary and secondary schools and student dormitories, as well as employees in the field of culture in the Republika Srpska.

Around additional BAM 19,500,000 will be allocated from the Republika Srpska Budget for the planned increase in salaries for employees in the field of education and culture with university and higher education.

The Government of Republika Srpska has approved the Draft Law on Pardon, which establishes the institution responsible for granting pardons, forms of pardons, prescribes criminal offenses for which pardons cannot be granted, the procedure for processing a pardon application, the jurisdiction of the Pardon Commission, the content of the decision on pardon, as well as other issues related to deciding on a pardon application.

The current Law on Pardons was adopted in 2006. In 2021, the National Assembly of the Republic of Srpska adopted the Law on Amendments to the Criminal Code of the Republic of  Srpska which introduced a new punishment - life imprisonment for most serious criminal offenses as well as the most serious forms of serious criminal offenses. The same law amended the provision of Article 101 which prescribes the content of the institution of pardon in such a way that it stipulates that a pardon cannot be granted to a person who has been sentenced to life imprisonment before serving 25 years of imprisonment.

The Law on the Execution of Criminal and Misdemeanor Sanctions of Republic of Srpska also stipulates that a prisoner is released from the Institution based on a Decision on Pardon, and also stipulates the conditions and procedure for releasing a prisoner from the Institution.

Considering the above, as well as the fact that the Ministry of Justice is responsible for  appointment and operation of the Pardon Commission, which acts on pardon applications, it was necessary to harmonize the provisions of the Pardon Law with the relevant provisions of the Criminal Code of the Republic of Srpska and the Law on the Execution of Criminal and Misdemeanor Sanctions of the Republic of Srpska, but also to amend the act on the appointment of the Pardon Commission in terms of prescribing the duration of the mandate for which the members of the Commission are appointed, as well as the obligation to adopt a by-law that will regulate the manner and functioning of the Commission, and for these reasons, the drafting of this law was initiated.

The Government of the Republic of Srpska adopted a Decision on granting consent to the Expenditure Plan of the Ministry of Family, Youth and Sports for the period Janury 1 to 30 November 2024 in total amount of BAM 289,787.63. The funds are allocated for subsidizing the interest rate for housing loans for young people and young married couples (BAM 286,120.96) and ongoing grants to associations of public interest (BAM 3,666.67).