Public and Private Debt: Recent Developments in Bosnia and Herzegovina

Abstract

This chapter deals with the issue of the public and private debt in Bosnia and Herzegovina. All the indicators of public debt in Bosnia and Herzegovina have been on a sharp upward trend since 2008. Denial and comparison with developed countries where these indicators maybe even higher are only excuses for not solving the problem. In conditions of stagnant or slow-growing public revenues, while debts are growing rapidly, an excessively large public administration that threatens private sector production and investment, an uncompetitive economy with low levels of foreign and domestic investments and a poor business environment, debts all threaten further progress. The stagnation of lending activity and high credit risks has also affected the corporate sector in recent years. Due to the lack of quality projects and the poor economic situation, the rate of credit growth has been depressed. The profitability of companies is very low, while losses of capital have increased and a high share of loans is used to repay existing loans. Loans for private housing purposes have also decreased, while general consumption loans been on a growing trend due to the low level of personal disposable income, causing households to borrow increased amounts to meet their basic needs.