BH credit rating confirmed – B2 with stable outlook

Moody's Investor Service announced today, on September 18, 2008 that Bosnia and Herzegovina's credit rating, will remain the same, B2 with a stable outlook.

In its Annual Report on Bosnia and Herzegovina, Moody's Investors Service says that the credit rating, with a stable outlook, reflects the persistent political and economic challenges facing the country, including multiple layers of government and a narrow economic base. The Report has confirmed sustained economic growth, although at a slow pace, and moderate government's debt.

In Moody's view, the country's institutions remain weak by both global and regional standards. The strengthening of institutions was hampered by a complex government structure and a insufficient cooperation amongst the various levels of government.

Moody's assesses Bosnia and Herzegovina's government as having a medium degree of financial strength, low degree of economic and institutional strength and high susceptibility to event risk.

Fiscal policy has been moderately constructive over the past five years and 2007 was the fourth year in a row that the general government primary balance was in surplus.

There is a minor risk that heightened political tensions could lead to economic and financial stress. However, the characteristics of the Bosnian banking system are such that a serious financial crisis appears unlikely. The banking system is dominated by the subsidiaries of Western European banks, which have introduced improved risk management techniques and which Moody's expects would provide additional capital in the event of stress.

In accordance with worldwide practice, Bosnia and Herzegovina will this year engage one more credit agency, Standard and Poor's which is expected to assign BH a credit rating by the end of the year.