Bosnia and Herzegovina: 2025 Article IV Consultation-Press Release; Staff Report; Staff Supplement; and Statement by the Alternate Executive Director for Bosnia and Herzegovina

Heightened political tensions are slowing reforms and progress toward EU accession. Growth has been resilient, but inflation has accelerated recently following a rapid decline in 2024. Fiscal policy in 2025 has turned expansionary, driven by discretionary measures; spending composition has deteriorated. Larger deficits in both entities (FBiH, RS) are expected to be financed mainly through foreign borrowing. The currency board (CBA) coverage ratio continues to rise, and the financial sector remains healthy and profitable amid high household credit growth. Nevertheless, central bank independence is under pressure. Furthermore, large increases in the minimum wage risk undermining competitiveness and encouraging labor market informality.

Subject: Capital spending, Expenditure, Exports, External debt, Financial institutions, Financial sector policy and analysis, Financial sector stability, International trade, Loans, Public debt, Securities

Keywords: Budget planning and preparation, Capital spending, Exports, Financial sector stability, Loans, Securities, Wages