The information about the Federation of Bosnia and Herzegovina (BiH) Government’s borrowing on the London Stock Exchange in a multi-million amount has raised many questions among citizens, as well as members of the Parliament of the FBiH. What is the reason for foreign borrowing if the FBiH is already over-indebted, is one of the reasons financial shortfall and crisis, who will repay the debts, and what can citizens expect by 2030?
Neither citizens nor some parliamentarians see a real reason for the borrowing, except that the authorities are once again resolving financial difficulties through new loans, while the citizens suffer the consequences.
Foreign borrowing by the Federal Government has no developmental character, according to parliamentarians. They highlight as a problem the fact that economic growth and industrial production do not follow the capacity to repay those loans. A member of the House of Representatives of the Parliament of the FBiH sent an open letter to the Government of the FBiH regarding this issue.
“We are not borrowing for investments, so that the investment will be visible, so that people will work, and that everything will contribute to GDP and the development of this country; we would support such borrowing. Here, we are borrowing to fill budget holes – where did those holes come from, why now this borrowing on some foreign stock exchanges? If the problem is the budget, why wasn’t the International Monetary Fund (IMF) approached instead?” says Haris Sabanovic, SDA representative in the House of Representatives of FBiH.
Last year, there was around 825 million in borrowing, of which 600 million was foreign and the rest domestic, according to DF representative Mirza Celik. He claims that the representatives have no information on where those funds were spent.
“We parliamentarians also find it strange why we are borrowing on the London Stock Exchange. There is no justification; we don’t know what the Government of the FBiH needs those funds for, except to cover daily liquidity, i.e., those items in the budget that cannot be funded in the way the Government planned,” says Mirza Celik, DF representative in the House of Representatives of FBiH.
The borrowing was also analyzed by HRS representative Slaven Raguz.
“It should be taken into account that we will have to repay a total of 455 million euros within five years, which is a relatively short period and will mean that we will not be able to service that debt, but will have to borrow further in order to repay it,” says Slaven Raguz, HRS representative in the House of Representatives of FBiH.
Economists believe that there were other, more favorable ways to borrow, but those steps require reforms. The money will be repaid by the citizens of BiH.
“There was no need for borrowing, in my opinion, especially not on the London Stock Exchange, because issuing eurobonds in the amount of 356 million euros will result in, it’s not yet defined but will be known, relatively high interest rates and high obligations. There were cheaper sources – the IMF – but the IMF requires certain reforms to be implemented, which the Government is clearly not ready to carry out,” says Aziz Sunje, professor at the Faculty of Economics, University of Sarajevo (UNSA).
The full debt, with an interest rate of 5.5 percent, must be repaid in 2030. The Minister of Finance said that, due to international regulations, he could not provide information about this borrowing. In the borrowing strategy adopted by the Federal Government for this year, the bonds will be issued for five to ten years. The stated reason is to expand the investor base for the long-term debt of the FBiH and to secure funds for financing the 2025 FBiH Budget.
