Aminatta Forna made her name with her memoir The Devil That Danced on the Water, which documents the circumstances surrounding the death of her father, a Sierra Leonean politician who was hanged on charges of treason in 1975. In The Hired Man she returns to her speciality theme of the psychology of civil conflict, but in a different setting – the small, aptly named, Croatian town of Gost, a place ravaged by the Yugoslav wars of the 1990s.

The book's narrator is Duro Kolak, an introspective handyman who grew up in the town. His memories of the immediate and the distant past are intertwined – a familiar device in contemporary fiction, but one that particularly suits the novel's subject matter. Laura, a naive middle-class Englishwoman, arrives in Gost with her two children to renovate a pretty house on the town's outskirts. Duro, who is intimately acquainted with the house, offers his services. The renovation functions as a slightly obvious metaphor for the resurrection of difficult and complicated memories.

We learn that, beneath the surface, life in Gost is anything but the simple pastoral idyll Laura had anticipated. Petty interactions between the town's inhabitants conceal a terrible history. With her beautifully precise style, Forna sensitively depicts members of a community resuming day-to-day life after violent civil conflict – each with the knowledge of the heinous crimes they committed against one another. The Hired Man is an ingenious examination of the kind of ghosts that those with no experience of civil war are unable to see.

The Hired Man is set in Croatia, in and around the fictional but entirely convincing little town of Gost (which apparently means “guest”). Its eponymous narrator is Duro Kolak, a childless bachelor of 46, who lives alone in a hut where his family used to keep pigs, in the wooded hills above the town. At the Zodijak, Gost’s principal café, Duro, Fabjan and Kresimir – a pair of quasi-gangsters he has known since boyhood – are the only three remaining of “the old crowd”.

Near Duro’s hut is “the blue house”, which has been bought by an English family, and where in the summer of 2007 Laura, the wife, arrives with her two teenage children – sulky, lazy Matthew, who is about to go to university, and earnest, podgy little Grace – while her husband, the children’s stepfather, works back in England. The house is neglected and decayed. Duro introduces himself, offers to do up the place, and befriends the family.

As he works on the house – assisted by Grace, who discovers a mosaic that has been whitewashed over, of a “red-bodied bird, golden plumed, dragging a golden tail” – hints of Gost’s past emerge, and the optimism of his account of careful restoration is skilfully and sickeningly undermined by a growing apprehension of evil, which is all the more frightening for being approached obliquely, and remaining largely mysterious.

When Laura drives into a Croatian village with the sun glinting off her 4x4, our first glimpse of her is through the sights of a rifle. Holding the gun is Duro, who will be the eyes for this powerful new novel by Aminatta Forna.

He is the local handyman, as well as a hunter with a soft tread and a sharp eye, whose life has been spent in and out of the forest shooting deer, birds and, when necessary, people. Laura is a middle-class Englishwoman abroad, with two teenage children in tow, trilling into the village of Gost to show her appreciation of its pastoral simplicity by renovating an abandoned blue house. But this is no Year in Provence. As Duro notes drily, the English are always in love with the past, but for his countrymen, it is a place best avoided.

The pacing of this novel is stunning. After an edgy beginning, it blooms into joyousness halfway through when the mosaic is restored, and then the cruelty begins to flow.

But in the end, The Hired Man is not a simple story of revenge. It is subtler and harder; it is about the power of not exacting revenge.