Bosnia and Herzegovina Expects Rating Upgrade

The International Agency Moody’s Investor Service, is reviewing the possible upgrade of sovereign credit rating for Bosnia and Herzegovina.

The Moody’s Agency assigned the first sovereign credit rating to Bosnia and Herzegovina, B3 with positive outlook, in March 2004. In the light of the meaningful progress in country building since the ratings were first assigned, Moody’s is reviewing the possible upgrade of Bosnia and Herzegovina’s rating.

The Moody’s stated that, after significant reforms in domain of military and police forces, BH has begun negotiations with the European Union (EU) on Stabilization and Association Agreement that should bolster integration with Europe and political and economic strengthening of the country. The major political parties in BH have recently reached the agreement on constitutional amendments that should lead to more effective and efficient governance. The greater competence of local officials has allowed the Office of the High Representative (OHR) to play a less interventionist role in management of the country.

Analysts of the Moody’s Agency also stressed advances in economic policy, including this year’s successful implementation of the Value Added Tax (VAT), as well as near-elimination of longstanding practice of budget payment arrears at various levels of government.

Moody’s also outlined some indicators which are restrictive to rating. There is still no resolution on issuance of local securities to compensate claims for frozen foreign currency deposits, although conclusion appears near. Of additional concern is the large current account deficit, but Moody’s confirms high export growth registered in the last year.

The Moody’s review will focus on political and economic side, political, to confirm the effects of recent reforms and prospects that the constitutional amendments will be implemented soon enough for forthcoming elections, and economic, focused on BH Balance of Payments and country’s internal debt.

“Being the agent of the state in the credit rating process, the Central Bank of BH, has managed to provide all relevant information and indicators confirming the progress achieved in BH, which could result in new, better, credit rating”, CBBH Governor Kemal Kozarić stressed. The new credit rating of Bosnia and Herzegovina will be announced no later than three months and it is expected to be B2.