IMF Mission In The CBBH

On 17 November 2011, the Governor of the Central Bank of Bosnia and Herzegovina (CBBH) Kemal Kozarić, Ph.D. with his assiociates talked with the International Monetary Fund Mission (IMF) for BH led by the Mission Head, Mr. Costas Christou. The meeting addressed the macroeconomic situation in BH, fiscal and monetary stability, the impact of the Euro zone debt crisis on BH, as well as, the situation in banking sector.

Mr. Christou informed Governor Kozarić on the Mission prior talks, and he presented the IMF Mission opinions on the overall situation and perspectives. Through the information and data collected in such discussions, the situation, especially in fiscal sector, is assessed as complex, without reforms on expenditure side of the budget, while there is an increase of wages and social benefits. Revised projections of the IMF show the economic rate growth of 1.7 % in 2011, while in 2012 it will fall below 1 %, as well as the decrease of the foreign investment. Only optimistic forecasts are those related to the  increase of public investments by 12% app. The joint assessment of the meeting participants is that the problems from the previous period have not yet been resolved, which are reflected in a stalemate with the Council of Ministers establishment, delays in implementing of reforms, in the fiscal deficit, the additional weakening of already weak real sector, non implementation of privatization, the increasing of administration and decreasing of investments.

It was estimated that the revenues side of the 2012   Entities' budgets is set up optimistically and that there is a real long-term possibility for non-payment of liabilities to the creditors. The need for a consensus in the work of the BH Fiscal Council is stressed in order to have the soon adoption of the fiscal global framework and the state institutions budget for the upcoming year. Also, the Stand by Arrangement has provided a kind of certainty in the fiscal area, but some issues could be rised with its expiration. A for the BH arrangement with the IMF, they pointed out the need to reach agreement within BH Fiscal Council for the necessary budgetary adjustments at all government levels in order to negotiate a potential new arrangement with the IMF.

When the financial sector is in question, the current data say that banks in BH are liquid. But, banks have issue of non-performing loans, which, instead of the expected decrease, record the increase amounting to 12.6 % of total allocated loans. There is also danger that crisis from Euro Zone spillovers to Bosnia and Herzegovina.

At the end, Mr. Christou has complimented to the CBBH for all activities done from the beginning of the crisis until today. With its own actions, the CBBH has contributed to the overall stability and security, while running the monetary policy founded on the Currency Board Arrangemenet, as well as through preservation of the monetary stability. Governor Kozarić has stressed that the CBBH will maintain the current model of monetary policy, since this is the time of conservative models, and that the CBBH will do its best to rise the risk awareness.

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