Bosnia warned over veterans' pay boost

Bosnia needs aid to recover from the effects of war

By Nick Hawton BBC correspondent in Sarajevo

Bosnia's federation parliament will discuss controversial new legislation on Tuesday which, if passed, could deprive the country of hundreds of millions of dollars in international loans.

The law would increase war veterans' pensions

The legislation calls for a dramatic increase in the amount of money paid out to war veterans who fought on the Bosnian Government side during the Balkans war.

The chief international envoy to Bosnia, Paddy Ashdown, says the move would break this year's budget and could lead the country into bankruptcy.

At the moment about $140m a year - or about one-quarter of the federation's total budget - is spent on war veterans.

The proposed new law on the rights of soldiers, war invalids and families of deceased soldiers would increase this figure by $90m.

Loans risk

Mr Ashdown says this increase would break the federal budget and jeopardise hundreds of millions of dollars in loans to the country.

Ashdown said the plan would break the budget

The International Monetary Fund (IMF) has threatened to scrap a stand-by loan worth nearly a $100m and more loans could be lost from the World Bank and European Union.

This in turn could threaten the government's ability to pay state employees, including teachers, nurses and doctors.

Whilst it is accepted that there needs to be a revision of the current system of payments for war veterans, many people believe there are political reasons behind the current row.

Parties are beginning to jockey for position before October's crucial general election.

No politician can be seen to be opposing legislation which would benefit war veterans - still a powerful and vocal part of the electorate.

But the stakes could not be higher, with hundreds of millions of dollars in the balance so crucial to Bosnia's long-term development.