BOSNIA: PLIGHT OF PENSIONERS DIRE

UNCLAS SECTION 01 OF 02 SARAJEVO 001173 SIPDIS SIPDIS DEPT FOR D (SMITH),P (BAME),EUR (DICARLO),EUR/SCE (ENGLISH, FOOKS, MITCHELL, SAINZ),NSC FOR BRAUN, OSD FOR FLORY, USNIC FOR WEBER AND GREGORIAN E.O. 12958: N/A TAGS: ECON PGOV PHUM PREL SOCI BK SUBJECT: BOSNIA: PLIGHT OF PENSIONERS DIRE SARAJEVO 00001173 001.2 OF 002 ¶1. Summary: Bosnia's 500,000 pensioners represent its largest special-interest group and will be influential in the October 2006 general elections. They also vote in a higher proportion than younger citizens. Increasingly squeezed by Bosnia's new national value-added tax (VAT) and rising health care costs, there are signs that the entity-level pensioners' associations are finally coming together to discuss issues of common concern. Although some pensioners will likely vote along ethnic-nationalist lines, they represent a potential source of support for opposition parties provided these parties reach out to them as part of issue-based campaigns. End summary. BARELY GETTING BY ¶2. With 307,000 pensioners in the Federation and about 200,000 in the Republika Srpska (RS),pensioners represent a significant segment of BiH's population of about 4 million. In the Federation, an estimated 75 percent of them, or 225,000 people, are below the poverty line, with an average monthly income of less than $164 (250 KM). In the RS, where pensions are lower, the proportion of elderly poor is even higher. Many pensioners live with their extended families or receive remittances from relatives overseas. However, the minority who must survive solely on pension income are truly in dire circumstances. ¶3. For example, if a pensioner receives a monthly pension of $131 (200 KM),he will have to spend about $99 (150 KM) on utilities. (Note: In the Federation, regulators recently approved a 6.6 percent tariff increase in addition to the seven percent increase generated by BiH's new value-added tax (VAT)). This leaves him with 50 KM or 1.6 KM per day for food, clothing, medicine, transportation and other expenses. On average, a pensioner supports 1.6 people, which translates to less than a dollar a day per person. This is an income level considered to be "extreme poverty" by the World Bank, and puts many of Bosnia's pensioners on a par with people in the poorest countries in the developing world. UNEQUAL TREATMENT ¶4. Benefits vary widely between the entities and within the Federation. Some of the more affluent Cantons within the Federation are able to offer additional benefits to the most vulnerable pensioners. In Sarajevo Canton, for example, pensioners with incomes less than $118 (180 KM/month) (the minimum pension in the Federation) receive a $33 (50 KM/month) subsidy for winter heating costs. In Sarajevo Canton, more than 100,000 people or about one third of the population receive some kind of social assistance, including free public transportation, heating subsidies, and at-home nursing care or are on the client list of NGO-run soup kitchens, which are subsidized by the local government. In the city of Mostar, pensioners with incomes under $131 (200 KM/month) are eligible for free public transportation. However, pensioners in impoverished areas must survive solely on their pension payments. THE IMPACT OF VAT ¶5. Since the introduction of VAT in January 2006, the economic situation of pensioners has worsened. According to the Federation Association of Pensioners, prices of medicines have gone up at least 30 percent, and most pensioners spend a large portion of their incomes on medications, which are not covered by public health insurance. By the Association's estimate, pensioners who were living on $1/day (1.6 KM) are now reduced to 66 cents (1 KM/day),with which they must cover food, clothing, medical expenses, utilities, rent and transportation. One positive development in the Federation is that the Federation Pension Fund is currently making payments to wipe out past unpaid benefits dating back to 2000. However, according to the Association, the Pension Fund still owes pensioners back payments from 1991-August 1998, a total of some $4.5-$5.2 million (700-800 million KM). The Federation has also implemented one limited element of its proposed VAT mitigation program (designed to lessen the impact of VAT on BiH's poor) by increasing pensions by $6 (10 KM/month). Since the RS instituted its VAT mitigation program in April 2006, almost 130,000 pensioners who receive less than $164 (250 KM/month) are getting subsidies of an additional $6-10 (10-15 KM/month). In the RS, almost 70 percent of the mitigation funds are allocated to pensioners through the entity Ministry of Labor and Veterans Affairs. In the Federation, VAT mitigation activities are delegated to SARAJEVO 00001173 002.2 OF 002 the ten Cantonal Ministries of Social Welfare. Although these Ministries received a forty percent budget increase in 2006, their policies are so poorly targeted that much of the assistance is not reaching the neediest beneficiaries. AN UNTAPPED POLITICAL FORCE? ¶6. As in many other countries, pensioners tend to vote in greater numbers than younger citizens. Although some are politically conservative and vote along ethnic-nationalist lines, many civil society observers feel that pensioners would be responsive to issue-based campaigns that focus on the topics that are most critical to them: social benefits and health care. The RS and Federation Associations of Pensioners are members of the NGO coalition Citizens' Organization for Democracy (GROZD),which is funded by the Center for Civic Initiatives (CCI). GROZD members represent a wide spectrum of the Bosnian population in addition to pensioners, including union members, youth, women, and farmers. GROZD is organizing a conference in Sarajevo on May 24 to develop a citizens' platform for the October 2006 general elections, which will identify key issues on which parties should focus during the campaign period. COMMENT ¶7. Because pension and health insurance funds are administered at the entity level, pensioners in each entity have often seen their interests as competing rather than complementary. One example: Pensions owed by one entity to internally displaced persons (IDPs) living in the other entity divided pensioners, who did not want IDPs to be paid from "their" fund. However, we are encouraged by the participation of the entity pensioners' associations in the development of a common citizens' platform. Given the pensioners' numbers and record high turnout in past elections, we will encourage opposition parties to increase outreach to pensioners on issues of health care and social benefits in the run-up to October's general elections. MCELHANEY