VZCZCXRO7442
PP RUEHAST
DE RUEHVJ #1173/01 1451235
ZNR UUUUU ZZH
P 251235Z MAY 06
FM AMEMBASSY SARAJEVO
TO RUEHC/SECSTATE WASHDC PRIORITY 3576
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEKJCS/OSD WASHDC
RUFOAOA/USNIC SARAJEVO
RHEHNSC/NSC WASHDC

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