Political Stalemate Worsens Bosnia’s Economic Woes

Sarajevo

Economic analysts say that while the impact of the global crisis is the principle reason for Bosnia’s economy woes, the failure of local leaders to exploit the country’s business potential or even pass a budget is also crucial.

“The bad economic environment for foreign investors is just one of the things that could have been avoided if domestic factors had behaved responsibly and intelligently while making decisions, both operational and strategic,” said analyst Erol Mujanovic.

Data from the Central Bank of Bosnia and Herzegovina reveals that foreign capital investments are at their lowest since 2000. According to the Bosnian Foreign Investment Promotion Agency, FIPA, in 2010 about 360 million euro was invested in Bosnia and Herzegovina.

Anto Domazet, professor at Faculty of Economics in Sarajevo, said that this drop in inward investment is endangering the economy.

“The economic situation in Bosnia is dramatic,” said Domazet, “If you look at neighbouring countries, they have all taken certain measures [to fight the crisis] and Bosnia does not even have a budget.”

A direct consequence of the political stalemate that has lasted more than 14 months is the absence of a state budget since 2010, forcing institutions to rely on temporary funding.

Last week, the international credit rating agency Standard and Poor's lowered Bosnia's credit rating one step to B because of the absence of a government since the election of October 2010.

Bosnia's foreign debt at the end of the last year, according to State Ministry of Finance and Treasury, was 3.1 billion euro, which is about 22 per cent of GDP.