Standard & Poor’s credit rating for Bosnia and Herzegovina stands at B with stable outlook. Moody’s credit rating for Bosnia and Herzegovina was last set at B3 with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Bosnia and Herzegovina thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for Bosnia and Herzegovina as reported by major credit rating agencies.
The stable outlook on Bosnia’s B3 rating reflects Moody’s expectation that Bosnia will continue to meet the conditions for concessional external financing, albeit with delays, which would provide the needed financial and technical assistance to continue to gradually progress the reform agenda.
However, significant reform progress will be hampered by ongoing political disagreements which distract from a country-wide reform focus and limit Bosnia’s ability to address the notable structural constraints needed to improve its credit profile, including material improvements to the business environment, a strengthening of institutions and addressing risks to debt sustainability at all levels of government.
Bosnia and Herzegovina’s local-currency bond and deposit ceilings and long-term foreign-currency bond and deposit ceilings are unchanged at B3. The short-term foreign currency bond and deposit ceilings are also unaffected by this rating action and remain Not Prime (NP).
The first factor for Moody’s decision to affirm the B3 rating on Bosnia and Herzegovina (Bosnia) is the country’s resilient economic performance despite a number of headwinds in recent years, including unfavourable weather conditions and the country’s volatile political dynamics.
Real GDP has grown by an estimated average 3.2% over the past three years, with household consumption benefitting from remittance inflows, an acceleration in bank lending and modest employment gains. Furthermore, improved access to the European Union (EU) market, through higher quotas for tariff-free exports including in the agricultural sector, has supported double-digit goods export growth in 2017. Similar to other Balkan countries, tourism has been a bright spot with the number of foreign arrivals growing by around 19% in 2017. Moody’s expects real GDP growth to continue to remain robust in the coming years (3.7% in 2018) supported by private consumption and improving regional growth prospects, although the economy will still continue to grow below pre-crisis rates.
A streamlining of the policymaking process resulting from greater internal consensus, improving Moody’s political risk assessment, would place upward pressure on the rating. In particular, a more stable policy making environment resulting in a stronger reform momentum that helps to strengthen institutions and address significant economic constraints leading to a material increase in medium term growth prospects, would be credit positive. Furthermore, ongoing timely compliance with the IMF agreement, helping to addresses fundamental aspects of fiscal reforms to ensure debt sustainability at all levels of government, would be credit positive.
A negative rating action could occur in the event the country is not able to meet the conditions to release concessional external financing disbursements, increasing risks to government financing and its ability to roll over forthcoming IMF repayments. In addition, a halt in the reform agenda, including to deepen Bosnia’s integration with the EU, would also be credit negative, which may result from a longer than expected delay in forming a government following the forthcoming elections. Furthermore, a marked escalation in political volatility resulting in increased concern for the country’s future as one sovereign nation, could also lead to downward rating pressure.
