CBBH Financial and Economic Indicators for 2007

In 2007, the Central Bank of Bosnia and Herzegovina (CBBH) has achieved record results in 10 years of its operations.

According to the financial results, the CBBH ended 2007 with foreign reserves amounting to KM 6,7 billion, representing the increase of more than KM 1,2 billion, or of 22,9% in comparison with 2006. Net free reserves as of December 31, 2007, amounted to KM 393,7 million.

In the last year, the CBBH also achieved the largest profit recorded so far in the amount of KM 142,6 million, of which KM 59,9 million was transferred to the budget of BH institutions at the beginning of April 2008.

In accordance with international standards, analyses were performed within the CBBH Financial Reports, which show exposure and sensibility to market risks. The analyses have shown that the CBBH has satisfying liquidity, which means that Bank's liabilities are adequately covered with liquid assets. Analyses also show that the bank was not exposed to larger market risks during the process of investment of foreign reserves, such as exchange rate related risks, interest fluctuations risks or credit risks.

Positive operations of the CBBH were also confirmed by the external auditing company Deloitte, stressing that the CBBH Financial Statements for 2007 were reliable and accurate.

As the fiscal agent to the state, the CBBH has regularly serviced foreign obligations which amounted to KM 3,9 billion at the end of 2007. The total amount of foreign debt has reduced by KM 167,2 million, or by 4,1% compared to 2006.

The year ended with the Decision of the CBBH Governing Board on increase of reserve requirement rate for commercial banks from 15% to 18%, in order to slow credit growth. This Decision is implemented from the beginning of this year.

During 2007, a rapid increase of FDI inflow in B&H was recorded. In accordance with the CBBH estimates, FDI in 2007 amounted to close to KM 2,9 billion. The reason for such significant inflow of FDIs was realization of the large privatization agreements during 2007. Convincingly, the largest privatization agreement is the sale of the Telekom Srpske, as well as the privatization of the oil industry in Republika Srpska.

The year was also marked by several negative economic indicators - 4,9% inflation at the annual level, measured in December 2007 in comparison with December 2006, followed by stopping of downward trend of interest rates in B&H, as well as, worsened Balance of Payments position. Foreign trade imbalance still represents one of weaknesses of B&H economy, considering the level of the current account deficit, which is present for several years already. This is the consequence of transition which B&H is passing through, but also of the external factors, on which B&H, as a small country, cannot influence.

General increase of the current account deficit in B&H is the consequence of the large increase of foreign trade deficit in 2007 and, in essence, KM 8 billion foreign trade deficit can be easily identified as the main cause of the current account imbalance. Reasons for worsening of the foreign trade deficit in B&H are large increase of imports in some branches, as well as, in the general increase of goods prices.

Public Relations Section