Bosnian Monetary Policy Comes Under Attack

The call for the printing of money, made by Republika Srpska president Milorad Dodik, who is also the leader of the strongest Bosnian Serb party, the Alliance of Independent Social Democrats, triggered heated debates over the weekend.

Speaking at a press conference in Banja Luka on Friday, Dodik demanded that Bosnia's Central Bank abandon the currency board which regulates the country's monetary policy and prints additional money to fix growing budget deficits on almost all administrative levels. 

"Foreigners and international institutions are controlling [Bosnia's] monetary policy," Dodik alleged.

Bosnia's Central Bank swiftly responded with a statement stressing that the currency board arrangements are embedded in Bosnia's legislation, which establishes exactly how much local currency can be in circulation and prevents any additional printing of money.

"This monetary model secures stability for the local currency, and citizens' and institutions' trust in the [Bosnian] Convertible Mark [KM] is unquestionable. Foreign currency reserves are stable and are constantly growing, as well as savings in the local currency, the KM," the statement said. 

This debate came amid a new liquidity crisis in the country and the worsening of the economic and social situation as political disputes before, during and after the general elections last October blocked payment of the latest tranche of standby funds from the International Monetary Fund.

Bosnian legislators introduced currency board arrangements in 1997, in order to stabilize the Convertible Mark and increase trust in Bosnian institutions. 

The currency board fixed the KM's exchange rate first to the Deutschmark and later to the euro, while Bosnia's...