The foreign exchange reserves of Bosnia and Herzegovina on July 31, 2022 amounted to about 16.25 billion BAM, of which the monetary gold reserves of the Central Bank (CB) of BiH currently amount to about three tons or about 2 percent of the total foreign exchange reserves, they told “Avaz” from the CBBH.
Compared to the previous year, an increase of about 850 million BAM was recorded, because, as of August 31, 2021, the foreign exchange reserves of our country amounted to about 15.4 billion BAM.
“The law stipulates that one of the basic tasks of the CBBH, which is carried out under the authority of the Bank’s Governing Council, is to hold and manage official foreign exchange reserves, primarily in a safe manner, and then to be guided by the principles of profitability,” they said from the CBBH.
According to the rules of the currency board, foreign exchange reserves are a cover for the domestic currency, so in accordance with that, the CBBH carries out daily BAm-euro purchase and sale transactions, the settlement of which is carried out through the CBBH’s foreign exchange accounts with foreign banks where the foreign exchange reserves are located.
When asked how they comment on the proposal to withdraw foreign exchange reserves in Bosnia and Herzegovina, the Central Bank replied that in that case it would not be possible to adequately perform the functions and tasks for which the foreign exchange reserves are kept.
“Monetary gold, which is an integral part of foreign exchange reserves, is kept by the CBBH in an account in a bank in Switzerland with a credit rating of AAA (Fitch), and is physically located in the vault of the Bank of England. The price of gold is subject to great volatility, and the CBBH is not able to invest significant amounts of foreign exchange reserves in monetary gold. The CBBH carefully monitors the movement of the price of this precious metal and considers potential decisions on the purchase or sale of gold,” the CBBH states.
The BAM exchange rate is stable and tied to the euro.
“Due to the attachment to the euro and the fact that the eurozone is BiH’s main foreign trade partner, macroeconomic events in the eurozone directly affect BiH and thus we “import” inflation. Every convertible mark has full coverage in euros, and this is guaranteed by law. This means that the BAM cannot devalue against the euro, which is particularly important in the current conditions,” the Central Bank of Bosnia and Herzegovina points out.
The inflow of foreign direct investment in Bosnia and Herzegovina in 2021 amounted to BAM 971.2 million, as shown in the data of the Central Bank of Bosnia and Herzegovina (CBBH) which published the results of statistical research on foreign direct investment for 2021.
Regarding geographic distribution, the highest inflows of investment during 2021 were from Switzerland (BAM 210.8 million), Turkey (BAM 147.0 million) and Great Britain (BAM 126.1 million).
By activities, most investments were realised in the area of retail trade in the amount of BAM 172.9 million, followed by the area of production of finished metal products 114.1 million, and the area of base metal production BAM 102.7 million.
The inflows of investment can be considered encouraging, as they are higher by 250 million than in 2020. The growth trend of reinvested earnings of the existing companies with foreign investments from 2020 continued in 2021 as well. However, reinvested earnings had a lower share (54%) in the total flows, as a significant increase of investment in the form of ownership shares was recorded, while other capital decreased at the same time.
In the end of 2021, foreign direct investments amounted to BAM 16.28 billion. Such amount results from investments during the previous years, and operations of foreign owned companies. The highest amount of direct investments is still related to Austria (BAM 2.88 billion) or 17.7% of the total investment amount, Croatia (BAM 2.72 billion) or 16.7% and Serbia (BAM 2.25 billion) or 13.8%. Observed by activities, the highest amount of foreign direct investments was recorded in the area of financial services (BAM 3.67 billion), followed by the area of telecommunications (BAM 1.75 billion) and wholesale trade (BAM 1.44 billion).
