Bosnia and Herzegovina CHAIRMAN'S SUMMINGUP Poverty Reduction StrategyPaper and JointIDA-IMFStaff Assessment June 15,2004 The Executive DirectorsconsideredthePovertyReductionStrategyPaper - MediumTermDevelopmentStrategy(PRSP-MTDS) for BosniaandHerzegovinaand the Joint IDA-IMF Staff Assessment (JSA)of the Strategy. Directors welcomed the extensive stakeholder participation in the developmentof thePRSP,notingtheimportanceof this process for bringingtogetherthedifferent constituencies of the country, andencouragedcontinuedconsultationandparticipation during the implementation of the strategy. Directors noted that the PRSP included a good analysis of the causes of poverty, rooted in a sound survey-based poverty diagnostics, but emphasizedthe importance of betterprioritizationand full costing of thestrategy to ensure its consistency with the medium-term expenditure framework,available domestic and foreign resources, implementationcapacity,politicalcommitmentandcountry ownership. Directors supportive were of thestrategy's emphasisprivate on sector developmentasavehicle for restoringgrowthandbuildingamarketeconomy.They concurred with the staff on the importance of accelerating the privatization process, and stressed the needto put in place an appropriate legal and regulatory framework, improve the operations of voucher-privatized firms and address the remaining weaknesses in the country'sbusiness environment andfiscal architecture. Directors welcomed the particular focus of the PRSP on accelerating the process of Stabilization andAssociationwiththe EU, andemphasizedtheneedforfurther institutional strengthening at the State level. They underlined the urgency of building a unified and competitive economy, given the growing risks associated with the reduction in external aid, the highlevel of domestic debt and unsustainable current account deficit. Directors noted the needto improve the statistical capacity in the country and urged staff to include necessary measures in the upcoming country assistance strategy (CAS). Directorscommended the government'sdetermination to acceleratethereform program, and, in particular, the effort to reduce the size of government in the economy, while increasing public expenditure efficiency - most notably through reorienting social programs to those most in need - andstrengtheningtransparencyandaccountability. They also stressed the importance of aggressively pursuing the anti-corruption program. Directors noted with concern the prevailing high rate of unemployment in thecountry and underlinedthe need to address the issuesof at-risk groups, especially the youth. Finally, Directors concurred with staff that the PRSP provides a sound basis for continued IDA concessional assistanceto Bosnia and Herzegovina and urgedto continue working closely with the country's other development partners to help the authorities in the implementationof the strategy