The European Central Bank (ECB) raised interest rates again late last month with the aim of limiting spending. The interest rate for bank refinancing will be 4.25 percent, and for commercial bank loans it will pay interest of 4.5 percent in the future. We investigated - what is the situation in Bosnia and Herzegovina when it comes to raising interest rates. Is there cause for concern?
Bosnia and Herzegovina is quite independent and is not always tied to any agreement with the European Central Bank or the US Central Bank in order to immediately feel the rise in interest rates that have increased again in the global market. However, the most important thing for our country is to monitor the monetary policy of the European Central Bank, since our goal is to become a member of the EU. That is why the ECB's rigorous policy to maintain inflation is being monitored with great attention these days, as the President of the European Central Bank has said that she will raise the benchmark interest rate, admittedly preventively, in order for the whole of Europe to remain with inflation within the 2 percent per year limit. Bosnia and Herzegovina is now in a much more favorable position.
"The latest information, in six months that inflation has come down by 4.2 percent. But don't forget that the end of the year ended with 14 percent. So, we didn't do anything, inflation fell by itself. I mean, it did not fall by itself, but market developments are such that there has been a fall in inflation, which does not mean that it also suddenly cannot jump, because we do not have the instruments to prevent it," says economic analyst Zeljko Rička.
However, any jump, if it were reflected in Bosnia and Herzegovina and the rise in interest rates, would be difficult for citizens to accept.
However, for now, there should be no concern, said Recently in our program Jasmin Mahmuzić, director of the Banking Agency of the Federation of Bosnia and Herzegovina. He believes that the interest rate-raising tool used by the ECB is understandable, but that such an approach does not apply to Bosnia and Herzegovina for the time being.
"Our goal is to try to keep these certain risks that may arise from the increase in ECB interest rates, due to the increase in EURIBOR, outside of Bosnia and Herzegovina. Because, our position is that the inflation we have in Bosnia and Herzegovina did not originate in BiH, it was imported. The difference between the inflation rate in BiH and the one in the EU is because of some weaknesses that we have and this passive approach that we need to have, that we stick to and think is the right one. Correct, because we want to preserve stability," Mahmuzic said.
Željko Rička believes that banks that are on the BiH market are not even ready to raise interest rates for now, because any increase in interest rates would certainly jeopardize the repayment of loans.
"We are not in the system, that we have to listen to a member of the system. But we have our own Central Bank, which in some way, by agreement, conducts a policy with domestic banks of a peaceful overcoming of potential problems. It would be very good to keep it that way because we would not jeopardize the banking system. Higher changes in interest rates would certainly jeopardize the creditworthiness of banks," he believes.
What is still favorable for Bosnia and Herzegovina at the moment is that the movement of our goods and services is mainly related to the European market. So, as long as this policy of the European Central Bank is active enough to fight inflation, Bosnia and Herzegovina will be fine.