On the occasion of the announcement by the Central Bank of BiH of May 31, 2016 in which the Bank tries to deny the findings from the Report of the State of Nation published by the Centers of Civil Initiatives on May 30 for the complete, understandable and true interpretation of official indicators, the Centers of Civil Initiatives reiterate that their data on the inconvertibility of the domestic currency are accurate.
CCI keeps claiming that only 45 percent of total money supply is convertible into the foreign currency. The money is not created solely with notes and coins issued by the Central Bank, but also through the banking system.
“According to the official data of the Central Bank (Newsletter of CBBiH, no. 4/2015, pg 135), total money supply in BiH amounts to 18.6 billion BAM. Reserves of foreign currency amount to approximately 8.6 billion BAM (Newsletter of CBBiH, no. 4/2015, pg 198), which is only 45 percent coverage of money supply with reserves. In accordance with the aforementioned, we still claim that 55 percent of money supply is inconvertible into the foreign currency. Application of the Law on Central Bank of BiH was not a subject of analysis, findings, or claims by the CCI, nor was it implied that the Law is being violated by the Central Bank. However, in their statement the Central Bank does not answer the question whether all depositors could withdraw their deposits, which amount to 16.5 billion BAM (Newsletter of CBBiH, no. 4/2015, pg 144), in EUR?,” the CCI stated.
Trust in the monetary policy and the Central Bank is based exclusively on the credibility of politics and actions of the Central Bank. One of disputable policies is the reduction of obligatory reserve for commercial banks for which it is said in the IMF’s report number 15/177 for BiH on the page 29, paragraph 54, that “the Central Bank must reconsider the adequacy of obligatory reserves because they have been drastically reduced during the financial crisis”.
“Thus, the reduction of obligatory reserves by the Central Bank after the crisis in 2008 was assessed as drastic, and the bank is called to reconsider such policy. Between 2008 and 2010, the decrease in deposits amounted to about 40 percent (report of IMF for BiH number 15/177, page 36, graph Deposits and M2). Outflow of capital was prevented with the increasing of the guarantee of deposits by the state to 50.000 BAM (since 2004 until 2014 the ensured sum of deposits increased from 5.000 BAM to 50.000 BAM per deposit). The Central Bank must elaborate to the public the policy which will maintain the stability of the currency and the financial system, in case of the outflow of deposits of similar extent, if it happens now,” it as stated further.
Therefore, implying that the credibility of the Central Bank and the financial system might be brought into question with anyone’s findings or statements is a replacement of theses, the CCI thinks.
“Precisely because of the stabilization of the financial system and the implementation of responsible public policies in general, the CCI monitors the implementations and effectiveness of the Reform Agenda. Appreciating the readiness of the Central Bank to conduct a public dialogue and deeply understanding the seriousness of this subject, the CCI also remains open for cooperation and giving explanations about their own analyses of public policies and activities of institutions whose task is to work in the interest of the state and its citizens,” the CCI stated.
(Source: klix.ba/photo: inmedia.ba)
