The government of Republika Srpska (RS) in Bosnia and Herzegovina has made significant progress in recent years in strengthening the analysis, disclosure, and management of fiscal risks, with a particular focus on state-owned enterprises (SOEs). These efforts, led by the Department of Macroeconomic Analysis and Policy of the RS Ministry of Finance, have been complemented by initiatives to improve SOE coordination and oversight, managed by the General Secretariat of the RS Government. Ongoing reforms are expected to further enhance SOE accountability and gradually extend to cover broader fiscal risks. The analysis of SOEs is based on the International Monetary Fund’s (IMF) SOE Health Check Tool (SOE-HCT). These initiatives are supported by the IMF’s Public Financial Management (PFM) reform program for Southeast Europe, with funding from the European Union and Switzerland. Recent Developments In 2024, the Ministry of Finance (MoF) completed a draft of its second Fiscal Risk Statement (FRS), which provides a comprehensive analysis of the financial health of the SOE sector for 2023. While the FRS has not yet been published, preliminary findings show that the risk rating for major SOEs remains at Category 2 on a five-point scale (with 1 being low risk and 5 high risk), consistent with 2022. The draft includes a five-year trend analysis showing that several SOEs improved from Category 3 to 2 between 2019 and 2022, although some reversals were noted in 2023. The analysis reveals that although many SOEs maintain low liabilities relative to assets, they continue to face challenges in generating sufficient earnings to service their debts and often experience liquidity constraints. Aggregate sector performance showed improvement, with a small but positive return on equity of 2% in 2023, up from 1% the previous year. Only two of the 21 major SOEs posted losses. Sector liabilities finance approximately 27% of SOE assets, a relatively moderate level. While debt remains high relative to earnings, it has improved compared to 2022, and the sector is generally able to meet interest obligations. However, liquidity remains tight, with current assets covering only 55% of current liabilities. In terms of government support, SOEs received KM 49.3 million in subsidies and grants in 2023, a reduction of KM 8.1 million compared to the previous year. The largest recipients were Putevi RS (Roads RS) with KM 29.7 million and Željeznice RS (Railways RS) with KM 10 million. Next Steps The MoF has begun employing the IMF’s SOE Stress Test Tool (SOE-STT) to develop forward-looking risk assessments for individual SOEs and the overall portfolio. This tool will enable projections of SOE financial statements under varying macroeconomic and firm-specific conditions, helping quantify potential fiscal risks and assess the implications of different policy options. To improve fiscal risk reporting, the MoF plans to streamline the FRS by focusing it exclusively on fiscal risks related to SOEs, while broader analysis of SOE financial performance will be transferred to a separate SOE Report, to be prepared by the General Secretariat. The two institutions will coordinate closely to ensure alignment and consistency across both reports. Looking ahead, the MoF intends to gradually broaden the FRS to encompass other categories of fiscal risk, including macroeconomic fluctuations, debt and contingent liabilities, financial sector vulnerabilities, and subnational government risks. Meanwhile, the SOE Report will initially focus on financial results and, over time, expand to provide a more comprehensive review of SOE policies, objectives, and performance.