S&P affirms Bosnia’s B/B ratings on expected international support

By bne IntelliNews March 13, 2016

Ratings agency Standard & Poor's (S&P) affirmed on March 11 its credit ratings on Bosnia & Herzegovina at B/B as it expects that the country will continue to benefit from international financial support. The outlook is confirmed at stable.

S&P noted that the ratings were constrained by the country’s multilayered, and overlapping government institutions, that complicate its policymaking process and delay implementation of reforms. Another factor constraining the country’s rating is the weak fiscal management framework and the persistent current account deficits.

On the other hand, the rating agency expects that Bosnia will continue receiving international support and will sign a new deal with the IMF in the next few months. Such an agreement is expected to unlock additional funding from the European Union and the World Bank and to help the government to implement the key reform agenda, required by the EU.

However, S&P noted that an important condition for the signing of new deal with the IMF is the resolution of Banka Srpske.

In February, local news service Capital.ba reported that the IMF had asked Bosnia’s smaller entity, Republika Srpska, to declare state-owned Banka Srpske bankrupt in order to agree a new deal with the country.

In November last year, Republika Srpska’s banking agency, ABRS, fired the director of Banka Srpske, Zdravko Trivuncica, claiming that he had ignored a ban on accepting deposits. ABRS explained that Trivuncic had violated several regulations, the most serious of which was that he had allowed the bank to continue to accept deposits even though the agency explicitly prohibited this as the bank’s capital was significantly below the legal threshold of BAM15mn (€7.7mn). Before that, an audit at Banka Srpske found the bank ended 2014 with a loss of at least BAM17mn instead of the BAM298,000 profit it had claimed.

However, the entity’s government has proposed to the IMF to restructure the bank, which will only provide financial intermediation and will no longer operate as commercial bank.

S&P also forecast that Bosnia’s real GDP growth will average just under 2% in 2016-2019, supported by investment financed by multilateral institutions, as well as private projects particularly in the energy sector, together with steady but rather sluggish consumption and exports. Bosnia’s current account deficit is seen at 7.2% of GDP in 2016.

Bosnia’s general government fiscal deficit is expected to narrow to 2.0% of GDP in 2019 from slightly above 2% of GDP in 2016. General government debt is expected to increase to 48% of GDP by 2019 and to be mainly denominated in foreign currency.

Previously, S&P affirmed Bosnia’s rating in September, 2015.

Related Articles

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... more

Opposition in Bosnia’s Republika Srpska seeks no-confidence vote against government

Three opposition parties in Bosnia & Herzegovina’s Republika Srpska filed a request for a no-confidence motion against the government on May 15, ... more

Bosnia’s fourth attempt to meet requirements for IMF loan tranche fails

Bosnia & Herzegovina's parliament failed for the fourth time to adopt key legislative changes required by the International Monetary Fund (IMF) to disburse the second tranche under an ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss