Bosnia and Herzegovina, with an external debt of nine billion BAM (some 4.5 billion Euros) which is slightly above 19 percent of GDP, belongs to the less indebted countries. The external debt of our country has even decreased this year. Internal debt, however, is growing. It exceeded 3.5 billion BAM. Compared to the first quarter, it increased by 12 percent in the first half of the year. Although we are relatively debt-free, compared to the countries of the region, we have a less favorable debt structure. For a large part of the loan, it is not known what exactly it was used for.
As strange as it sounds, Bosnia and Herzegovina is not an over-indebted country. On the contrary. The total debt, both internal and external, amounts to 12.7 billion BAM. The external debt of the Federation of BiH is slightly higher than the external debt of the Republika Srpska, but that is why the internal debt is twice as small, even though the Federation of BiH has twice the population.
“The total debt of the Federation of BiH is 6.5 billion marks, which is 22 percent of its GDP, and that of Republika Srpska is 6.1 billion BAM, which is close to 40 percent of GDP. The external debt of the Federation of BiH is 5.3 billion, and that of Republika Srpska is 3.7 billion BAM. The internal debt of the Federation of Bosnia and Herzegovina is 1.2 billion, and that of Republika Srpska is 2.4 billion, that is, even twice as much,” according to the data of the Central Bank of Bosnia and Herzegovina for the second quarter of 2023.
The problem of Bosnia and Herzegovina is not the amount but the structure of the external debt. Most foreign loans, almost five billion, went to infrastructure projects, two billion and 800 million for the public sector, and less than a billion, that is only 940 million, for the economy.
“There is an imbalance between the use of money. It would be good if the economy and economic investments, productive investments, which more easily ensure the sustainability of the debt, i.e. its repayment, had a more significant participation”, says Milenko Krajisnik from the Faculty of Economics UNBL.
Borrowing for infrastructure has its own justification, because the state’s task is to provide both domestic and foreign investors with adequate conditions for work, with one of the priorities being quality roads, that is, highways.
“Without these infrastructure projects, we cannot expect the economy to reach a higher level of development, and therefore it is logical that the indebtedness of the state should be greater in relation to economic entities. Until we reach the level where that infrastructure is at a satisfactory level, so that economic activity can develop “, explains Zora Vidovic, Minister of Finance of the Republika Srpska.
Not everyone agrees with the claim that infrastructure loans were necessary. Especially when it is known that not a single meter of highway in BiH, for example, was built from excise taxes that are collected for this very purpose. Instead of our own money, we built highways and continue to build them with the help of loans.
“This absolutely does not justify new liabilities, especially liabilities for which the citizens of BiH are already responsible. And for some things, even in addition to that liability that should fully pay off a certain project, in addition to all that, we still pay certain tolls, tolls, levies through registration etc”, says Sanel Halilbegovic, professor of banking and finance.
Domestic authorities at all levels know very well that when it comes to the ratio of debt to GDP and that they have room for new borrowing, which they do. Bearing in mind the pace at which they are doing it, Bosnia and Herzegovina could very quickly become a heavily indebted country. It’s like they’ve never heard of “Debt is an evil friend”. And why would they be interested in such a thing, when they will not pay it back from their own pockets.
