REFORM OF PUBLIC EXPENDITURE

Abstract

Public financial management system defines procedures by which the public funds are allocated and administered in a manner that ensures fiscal discipline, observance of strategic priorities and provides efficient use of public funds. Public finance is an area of the highest expectations in the EU. Bosnia and Herzegovina is facing some challenges in the improvement of public expenditure. This system is largely based on contributions on wages, which threatens foreign direct investment and reduces competitiveness and growth. Therefore there is a need to reduce labor taxation focusing particularly on changing social contribution rates.