The economic storm from Europe could easily stir up our country as well. A new increase in interest rates would mean lower investments, a cure for inflation, but for BiH citizens still less money in the household budget. For now, the situation is stable, but there is no guarantee that it will not increase. Namely, banks are left with the possibility of individual action.
The convertible mark is fixedly tied to the euro, so the decisions of the ECB have a spillover effect on the BiH economy. Developed world economies, among the arsenal of weapons in the fight against inflation, use interest rate increases. Due to the weak economy, experts warn, BiH does not have that weapon.
“As far as BiH is concerned, the increase in the ECB’s interest rate is reflected only on loans, but not on deposits, which is not good for inflation. A little more on loans in the first years, and now this increase will not and cannot be significantly reflected on loans,” Berislav Kutle, director of the Association of Banks of Bosnia and Herzegovina, points out.
Director of the FBiH Banking Agency, Jasmin Mahmuzić, notes that there is no reason for a significant increase in interest rates in BiH – monetary policy in BiH is not as creative as the policy of developed economies.
When asked whether there will be an increase in interest rates, the Central Bank of Bosnia and Herzegovina assures that the answer is negative. They see justification in statistical data that do not indicate a significant increase in loans. However, along with optimistic news, they do not guarantee security, because banks will have their reasons and the possibility of increasing interest rates: “It is necessary to point out that commercial banks in Bosnia and Herzegovina rely almost entirely on domestic sources of financing, which are not closely linked to reference interest rates rates from foreign markets. The probability of a sudden increase in interest rates in Bosnia and Herzegovina banking market in the coming period is still very small”.
Instead of reducing inflation by increasing interest rates, the remedy for improving the economic picture is to tighten the government’s belt, according to experts. Reducing the spending of budget funds would be a solution. However, it is well known that for that solution BH. politicians do not intervene. On the contrary, squandering funds is doing much better for them.
“The ECB will surely raise base interest rates at each of its meetings, at least for this year, and it will probably spill over into the first quarter of next year, which will have the effect of raising interest rates in BiH as well,” warns economic expert Sanel Halilbegović.
Although inflation is significantly lower than last year, the US FED raised the key interest rate by 0.25 percent. We remind you that in May, the IMF sent a message to BiH that an increase in interest rates is necessary in order to reduce the difference between interest rates in the eurozone and in our country. And while opinions are divided on whether the rise in interest rates during inflation is a cure or a path to the collapse of the economy, an increasing number of citizens in our country live on credit, and the state is drowning in debt.
