Bosnia’s Federation To Start Issuing Pre-war Savings Compensation Bonds This Year

The government has sent to parliament draft legislation regulating the debt payment, it said after a meeting.

According to the draft, bonds with maturity of up to seven years and carrying annual coupon of 2.5% will be issued by March 31 for all deposits verified with the government before December 31, 2008. Citizens who have not verified their deposits yet will have to do so from April 1 until June 1 and the government will complete the entire verification procedure by August 31.

The cabinet gave no details of the expected total value of the bond issue. According to officials from the Federation’s finance ministry, quoted earlier by Bosnian media, the bond issue would be worth some 347 million marka ($230 million/178 million euro) and could be traded on the Sarajevo Stock Exchange (SASE).

Many depositors in the former Yugoslav Federation, of which Bosnia was part until 1992, lost their foreign currency savings held with local banks during the wars in Yugoslavia in the 1990s. The successor states of former Yugoslavia recognised as their own state debt the lost deposits held by banks that were registered on their respective territories.

The Muslim-Croat Federation is one of the two autonomous parts forming Bosnia after the 1992-95 war, and the other is the Serb Republic. They have their own governments, parliaments and fiscal systems. Bosnia also has weaker central legislative and executive institutions overarching them.

The Serb Republic issued in February last year its own bonds to compensate pre-war hard-currency depositors. The bond issue is worth 209.7 million marka, has maturity of five years and carries annual coupon of 2.5%. The bonds are traded on Bosnia’s other bourse, the Banja Luka Stock Exchange (BLSE).

(1 euro = 1.95583 Bosnian marka)