It said in a statement the country’s stable outlook balances its robust growth potential and the agency’s expectation that Bosnia will continue to adhere to the stand-by agreement with the International Monetary Fund against its difficult budgetary situation, complex political environment, and external and financial system vulnerabilities.
In July, the IMF approved a 36-month $1.52 billion (1.0 billion euro) stand-by loan for Bosnia to help the country mitigate the adverse effects of the global financial crisis.
"The sovereign credit ratings on BiH continue to be constrained by a large and complex political system, which is reflected in regular political stalemates. This will in our view continue to inhibit reform progress, especially in the run-up to the 2010 general elections. Fiscal management and flexibility continue to be weak and are constrained among other factors by sizeable contingent liabilities, while external vulnerabilities persist.
The ratings are supported, on the other hand, by the fact that the government has explicitly prioritized its external debt-service payments and those of its related entities. A currency board arrangement (CBA) that has successfully navigated the economy through the turbulence of the past year and a half also provides support to the ratings. The monetary stability provided by the CBA has been bolstered by the signing of the $1.57 billion 36-month IMF stand-by arrangement (SBA) in June 2009, which has helped to contain the risk of a disorderly disruption in financing flows to BiH, thereby alleviating external pressures while preserving strong growth potential. [...]
[...] Creditworthiness could improve if BiH continues to progress with its structural budgetary consolidation agenda; improves its institutional framework such that it makes headway to EU integration; and implements structural reforms that support its growth potential. Conversely, the ratings could come under pressure should budgetary imbalances remain unaddressed (thereby leading to a failure to comply with the IMF SBA), which could undermine the confidence of investors and depositors and put at risk economic and financial stability."
