The new borrowing of the Republika Srpska on the London Stock Exchange has once again opened a debate about fiscal stability and the conditions under which the entity borrows money abroad. While economic experts warn about high interest rates and growing financial risks, officials from the relevant ministries describe the arrangement as highly successful.
Within just two months, the Government of the Republika Srpska has borrowed a total of 750 million euros. Following a major bond issuance in March worth 500 million euros, the entity recently returned to the London Stock Exchange and secured an additional 250 million euros through bonds carrying an interest rate of 6.375 percent.
According to Republika Srpska Finance Minister Zora Vidović, the bonds were purchased by American investment funds.
“The rules of the stock exchange are such that after 90 days, buyers can be announced, and that rule must not be violated because large fines are imposed. I can only say that nine funds from America bought our bonds,” Vidović stated.
The borrowing arrangement was also defended by Srđan Amidžić, who argued that both entities in Bosnia and Herzegovina remain among the less indebted governments in the region. He added that access to international financial markets demonstrates credibility among foreign investors and proves that financial obligations are being serviced regularly.
“I am pleased that the Government of the Federation of Bosnia and Herzegovina is also preparing an 800 million euro borrowing on the London Stock Exchange, which will additionally demonstrate its credibility. People often discuss whether governments should borrow, without analyzing at what rates the existing debt is being serviced,” Amidžić said.
However, opposition representatives sharply criticized the new debt, warning that it could create long-term financial burdens for future generations.
Tanja Vukomanović described the borrowing as “pushing citizens into debt slavery.”
“If there is already a crisis and budget holes, then a serious recovery plan should be created instead of solving problems through even greater borrowing that could burden Republika Srpska for decades,” Vukomanović stated.
Economic analyst Zoran Pavlović warned that the high cost of borrowing on foreign markets poses significant long-term risks to public finances, especially if the funds are not directed toward productive investments.
“Whenever you are forced to take on new debt through bonds or loans to settle old obligations, global financial markets recognize that risk, and naturally, the price of borrowing becomes higher,” Pavlović explained.
Similar concerns were expressed by Jasmina Selimović, who emphasized that borrowing is acceptable only when aimed at investment projects that generate economic value.
“If debt is used for investment purposes, then it is not problematic. However, if borrowing is intended solely for social spending or expenses that do not create new value, it can become dangerous, and care must be taken not to exceed sustainable levels,” Selimović warned.
For the latest borrowing of 250 million euros, Republika Srpska will pay nearly 16 million euros annually in interest over the next seven years, amounting to almost 110 million euros in interest payments alone.
