Bosnia and Herzegovina, the latest EU aspirant to apply for a debt rating, hopes to tap foreign capital markets next year.
Bosnia may conjure images of Europe’s worst postwar conflict, but Peter Nicholl, the New Zealander and former World Bank executive director who runs its central bank, insists that the country has made dramatic progress. Pegging the konvertible marka to the euro has helped slash inflation to less than 1 percent. The government has negotiated an IMF credit and struck free-trade agreements with several neighbors. Confidence -- and deposits -- are returning to banks.
“In Bosnia’s case, we start from a negative point of view,” says Nicholl, who recently visited London with Treasury Minister Anto Domazet to begin the ratings process. “We’ve got to overcome that. We have to go out and sell the story that exists.”
Bosnia needs private funds if it’s to make the transition to a peaceful, market-based economy. The country relies now on foreign aid and remittances from émigrés to finance most of its $1.1 billion current-account deficit. But the economy is more robust than official figures suggest: Bosnians sent Dm4.3 billion ($2 billion) to Germany to trade for newly minted euros in late 2001 and early 2002. That works out to Dm1,000 per citizen -- roughly the equivalent of Bosnia’s per capita GDP.
Where did all that cash come from? “The gray economy is quite significant,” understates Nicholl.
