Bosnia And Herzegovina Credit Rating Remains The Same

International Rating Company Moody's Investor Service has announced today, June 5, 2007, that Bosnia and Herzegovina's credit rating will remain the same - B2 with Stable Outlook.

In its Annual Report on Bosnia and Herzegovina, Moody's Investors Service says its speculative-grade ratings and Stable Outlook reflect the creditworthiness of a complex nation still in the process of establishing its institutions and rebuilding its economy.

Moody's analysts state that the economy of Bosnia and Herzegovina has established a faster growth dynamic in the past few years and that the economic activity is broader-based across sectors. Introduction of the Value Added Tax at the beginning of 2006 led to a rapid rise in government tax receipts, keeping the consolidated budget in a modest surplus for a second straight year, and also helping to significantly narrow the trade and current account deficit.

However, analysts cautioned that spending pressures could push the budget back into deficit as early as this year. Additional obligations related to solving of internal debt will exert more pressure in the years ahead.

Moody's stated that the divisiveness endangered by the campaign rhetoric has not yet fully subsided, which delayed the formation of new governments after the election and brought the stabilization and association agreement talks with the European Union to a virtual standstill.

The mandate of the European Union's Office of High Representative has been extended by a year, although international community is sufficiently comfortable with the situation that most European peacekeeping forces are in the process of being withdrawn.

Credit rating of one country represents the assessment of possibility and willingness of the government of one country to service its debt fully and on time.

Better credit rating makes possible for the country to have better conditions to incur debt at the international capital market, that is, to issue bonds or indebt with commercial banks worldwide, at a lower interest rate, higher loan amount, or with the extended repayment period.

Credit rating is also important for potential foreign investors, who use it is the basis for obtaining the image of the economy of the country in which they intend to invest, but it is also the significant data for the government of that country in order to make the proper evaluation of the situation and make the necessary steps towards its improvement.

Public Relations Section