Unilateral Introduction of Euro is Not Permitted

Following the information on introduction of Euro as official BiH currency, prior to completion of reform processes in the country, Central Bank of Bosnia and Herzegovina  (CBBH) would like to provide the following explanations.

Above all, CBBH would like to emphasise that for the CBBH, as monetary institution in BiH, exit strategy from the currency board arrangement, which, as monetary policy has been used since 1997, is introduction of Euro, for which, there is a consensus at all levels of the authority. That includes accession into the Economic Monetary Union (EMU) and membership in the Eurosystem, which is comprised of Central Banks of the countries, EU members, which had already introduced Euro.

However, in order to achieve the above mentioned, BiH needs to fulfil a number of preconditions, while unilateral introduction of Euro is not permitted by the European Central Bank (ECB), nor by the European Union (EU).

First precondition is full membership of the country in the EU. By signing the Agreement on Stabilisation and Accession recently, BiH has made a first step in that direction. In order for BiH, as EU member, to become the member of the EMU, apart from political willingness, it needs to meet the criteria agreed in Maastricht in 1992, and which are written in the Deed of EU. Those are the criteria that regulate premitted inflation rate, budget deficit level, public debt, average nominal long-term interest rates, as well as exchange rate stability.

Apart from the aforementioned criteria, a country member of EU must support economic policy of EU, and aim at harmonisation with other macroeconomic indicators of Eurozone  including unemployment rate and level of foreign trade deficit, which,  unfortunately, in BiH are far above the Eurozone criteria.

BiH fulfils the criteria related to monetary stability, but fulfiling of other criteria is necessary in order to get integrated into the EMU, which requires engagement of all authority structures.

Until all the conditions are fulfilled for entering the Eurozone, CBBH shall consistently implement monetary policy through the currency board arrangement, which means that BiH citizens can have full trust in stability of domestic currency, Konvertible Mark, given that each KM in circulation has full coverage in foreign currencies. Foreign reserves data from the end of May this year indicate that BiH net foreign reserves amounted to 6,48 billion KM, monetary liabilities amounted to 6,08 billion KM, with 400 million KM in net free reserves. These indicators clearly show that stability of KM cannot be questionable.

Public Relations Office