Analysis: Foreign exchange reserves of Bosnia and Herzegovina

The foreign exchange reserves of Bosnia and Herzegovina as of July 31, 2022 amounted to approximately BAM 16.25 billion, of which the monetary gold reserves of the Central Bank (CB) of Bosnia and Herzegovina currently amount to approximately three tons, or about 2% of total foreign exchange. reservations, they said “Avazfrom the CBBH.

Compared to the previous year, an increase of approximately BAM 850 million was recorded, since, as of August 31, 2021, our country’s foreign exchange reserves amounted to approximately BAM 15.4 billion.

“The law stipulates that one of the fundamental tasks of the CBBH, which is exercised under the authority of the Board of Directors of the Bank, is to hold and manage the official foreign exchange reserves, first in a safe manner, then to be guided by the principles of profitability,” they said from the CBBH.

According to the rules of the currency board, the foreign exchange reserves are a hedge for the national currency, therefore in accordance with this, the CBBH carries out daily transactions of purchase and sale of euros in BAm, the settlement of which is carried out through CBBH exchange banks. foreign exchange accounts with foreign banks where the foreign exchange reserves are kept.

When asked how it comments on the proposed withdrawal of foreign exchange reserves in Bosnia and Herzegovina, the Central Bank replied that in this case it would not be possible to properly perform the functions and tasks for which the reserves exchange rates are retained.

“Monetary gold, which is an integral part of the foreign exchange reserves, is kept by the CBBH in an account in a bank in Switzerland with a credit rating of AAA (Fitch), and is physically located in the safe of the Bank of England. The price of gold is subject to great volatility and the CBBH is unable to invest significant amounts of foreign exchange reserves in monetary gold. The CBBH closely monitors price developments of this precious metal and considers potential decisions on whether to buy or sell gold,” says the CBBH.

The BAM exchange rate is stable and linked to the euro.

“Due to the attachment to the euro and the fact that the eurozone is BiH’s main trading partner, macroeconomic events in the eurozone directly affect BiH and therefore we ‘import’ inflation. Each convertible brand has full euro coverage, which is guaranteed by law. This means that the BAM cannot devalue against the euro, which is particularly important in the current conditions,” emphasizes the Central Bank of Bosnia and Herzegovina.

The inflow of foreign direct investment into Bosnia and Herzegovina in 2021 amounted to BAM 971.2 million, as shown by data from the Central Bank of Bosnia and Herzegovina (CBBH) which released the research results foreign direct investment statistics for 2021.

In terms of geographical distribution, the highest investment inflows in 2021 came from Switzerland (210.8 million BAM), Turkey (147.0 million BAM) and Great Britain (126 .1 million BAM).

By activity, most of the investments were made in the field of retail trade for an amount of BAM 172.9 million, followed by the field of production of finished metal products 114.1 million and the field of production of metals of base 102.7 million BAM.

Investment inflows can be seen as encouraging as they are 250 million higher than in 2020. The trend of growth in reinvested earnings of existing companies with foreign investment from 2020 also continued in 2021. However, reinvested earnings had a lower share (54%) in total flows, as a significant increase in investments in the form of ownership shares was recorded, while other capital decreased at the same time.

At the end of 2021, foreign direct investment amounted to BAM 16.28 billion. This amount results from the investments of previous years and the operations of foreign companies. The highest amount of direct investments still concerns Austria (2.88 billion BAM) or 17.7% of the total amount of investments, Croatia (2.72 billion BAM) or 16.7% and Serbia (2.25 billion BAM) or 13.8%. Observed by activities, the highest amount of foreign direct investment was recorded in the field of financial services (3.67 billion BAM), followed by the field of telecommunications (1.75 billion BAM) and trade in wholesale (1.44 billion BAM).

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