SARAJEVO, March 18 (FENA) - The IMF Resident Representative Office in Bosnia and Herzegovina issued a statement in light of recent calls to use funds from the Central Bank of Bosnia and Herzegovina (CBBH) to fight the coronavirus crisis.
The CBBH’s currency board arrangement has served BiH well for over two decades, contributing to low inflation, financial stability, and confidence in the currency. Under the currency board, the CBBH’s assets – its international reserves – must cover at least 100 percent of domestic currency issued.
In this way, the convertible mark’s fixed exchange rate with the euro is assured. Any attempt to use the central bank’s international reserves for fiscal purposes would undermine the currency board, threaten financial stability, and risk significant inflationary developments.
Such attempts undermine the anchor of macroeconomic stability. They should be avoided at all times and particularly in a situation of crisis.”
As BiH braces for the impact of the COVID-19 outbreak, it has the advantage of a banking sector that is broadly stable. Banks are sufficiently capitalized, liquid, and profitable, and these indicators have improved. Excess liquidity in the banks implies that banks are able to lend.
Nevertheless, credit and liquidity trends should be monitored closely. The IMF, together with the World Bank, stands ready to provide emergency assistance to help BiH fight the effects of the coronavirus pandemic, it is stated in the address from the IMF Resident Representative Office in BiH.
(FENA) S. R.