The most primitive political populism is destroying the BiH economy

01.01.2022. / 11:00

SARAJEVO – Incompetent and inefficient institutions of the ruling structure in Bosnia and Herzegovina offer us the most primitive political populism and diversion of attention from real problems such as pandemics, corruption and economic crisis, which all together cumulatively lead to further collapse of the already dysfunctional system, he said. CAPITAL economic analyst Igor Gavran.

PHOTO: Igor Gavran

Among other things, Gavran talks about topics that are not sufficiently represented in the domestic public, such as the challenges posed by cryptocurrencies to the banking system, the political and economic influence of China and Russia in BiH, and the possibility of BiH falling into recession.

“The greatest danger and risk that in some future period our economy will fall into a phase of stagnation and then recession lies in domestic unfavorable business conditions that slow down economic recovery, hinder further growth and development and inevitably limit the potential we have.”, Gavran pointed out for CAPITAL.

CAPITAL: Many financial institutions in BiH have recently emphasized that cryptocurrencies could be a major challenge for the banking sector in BiH. What do you think about that? In what sense could cryptocurrencies be a challenge for the banking sector and the entire financial system?

THE RAVEN: I think cryptocurrencies are a big challenge for the banking sector globally because many see them as a more attractive alternative for money placement, investment and business transactions than traditional banking flows. As the importance and role of cryptocurrencies grows, so does the dominance of banks and their traditional role. Of course, there are risks that go beyond the banking sector itself, and above all the attractiveness of cryptocurrencies for organized crime, terrorism and illegal transactions in general as a security challenge, and a huge risk for uninformed people deceived by the illusion of easy and faster earnings. they are indebted to buy cryptocurrencies and then lose all their money in various scams or simply the value of these currencies drops drastically over power, as a social risk.

I think that in the long run, even more challenging for banks in the long run than cryptocurrencies like bitcoin will be official national currencies in electronic form such as e-Yuan, e-Ruble, and probably soon e-Euro and other currencies. Because, unlike extremely risky and volatile international cryptocurrencies, for the value of which there is no real basis, this currency will have a much more realistic value, and they will not need traditional banks.

When it comes to Bosnia and Herzegovina, the role of cryptocurrencies in our market is still insignificant and this challenge is yet to come. In addition to the previously described global risks that apply to Bosnia and Herzegovina, the additional is the absence of any regulation in this area and the chronic slowness of our institutions in adapting regulations to our needs in all areas, including this one. Namely, it is unrealistic to expect that the authorities, which, for example, passively observe the problem of absurd increase in electricity prices that threaten the destruction of a significant part of the economy for months and only partially and improvisedly “solve” them on the evening of December 30, prepare adequate regulations.

CAPITAL: Apart from cryptocurrencies, what are some other challenges that the banking sector could face in the coming period?

THE RAVEN: Slowing economic activity, deteriorating business conditions and the inability of more debtors to meet their obligations could directly disrupt the banking system, and further political and overall social instability would indirectly but also negatively affect investment and new projects and thus the demand for new loans. I think these risks are a much bigger potential challenge for the banking sector in Bosnia and Herzegovina than long-term global challenges like cryptocurrencies.

CAPITAL: Could BiH be affected by the recession in the coming period due to the pandemic, inflation and all past events?

THE RAVEN: BiH was already in a “free fall” into recession during the first phase of the pandemic when the economy virtually stalled, similar to most other economies in the same period. However, current trends, including inflation, reflect a phase of recovery and acceleration of economic activity, and there are no current indications of recessionary trends, nor can a recession be expected in the near future.

The greatest danger and risk that in some future period our economy will fall into a phase of stagnation and then recession lies in domestic unfavorable business conditions that slow down economic recovery, hinder further growth and development and inevitably limit the potential we have. Political and overall social instability and the absence of economic reforms deter potential investors and lead us from crisis to crisis, which does much more and in the long run harms our economy from pandemics, inflation or any other relatively short-lived phenomenon caused by external factors.

CAPITAL: Why do no one in BiH, but also international representatives, refuse in advance to discuss at least some long-term plan to leave the Currency Board? Is the price paid by the export economy in BiH still justified due to the fixed exchange rate of KM?

THE RAVEN: I think that this price is still justified because destabilizing the existing system would expose both the economy and citizens to much greater risk and almost certainly large losses. Namely, smart and efficient independent monetary policy is certainly a better model in the theory and practice of regulated countries than the currency board, but in Bosnia and Herzegovina with its corrupt and incompetent authorities at all levels and inefficient institutions, it would be completely insane to expect such monetary policy. It is no coincidence that the most stable and best rated part of the economy in Bosnia and Herzegovina is this monetary one, which the local authorities cannot manage or destroy, just as they destroy everything else. Therefore, while we do not have the power and system to which it would be reasonable to entrust the management of monetary policy, the currency board is the best solution and should not be violated.

CAPITAL: What is the real danger of economic and political influence of China and Russia in this region, which has long been alarmed from Brussels? Is Brussels to blame for such a policy because they ignored the Western Balkans for too long and left it to other world players?

THE RAVEN: I think our greatest danger is to remain unattractive to investors who can bring capital and new technologies, employ our citizens and create new value in Bosnia and Herzegovina, no matter what country they come from. I will not comment on the political aspect (although as a citizen I do not see any “danger” in that regard, especially not from China), but economically I certainly can.

Paranoid warnings of an imaginary danger to Bosnia and Herzegovina from the economic influence of Russia and China are a combination of irrational Cold War rhetoric that justifies the spread of its own influence and simple economic competition. I think that Bosnia and Herzegovina must do everything to attract well-meaning investors from all over the world and that it must not discriminate against anyone. And greater investment and economic engagement from other countries will not only not deter cooperation between the EU, the US and others who warn of this “danger” but will also create positive pressure on them to engage more and offer better and more than they now offer and they invest more themselves. If we are completely dependent on one market and one area, as we are for the most part now on the EU, we are very weak and vulnerable to any crisis in that area and to any impact from that side. If we expand the circle of partners and markets with which we do business, we strengthen the resilience of our economy and reduce the risk of destabilization.

Attracting investments and strengthening economic cooperation with Russia and China are a great opportunity for Bosnia and Herzegovina and not a danger.

CAPITAL: In what order would you solve these problems or single them out as the highest priority for the domestic economy: Legal uncertainty, weak institutions, uncoordinated tax system, bad Public Procurement Law, refusal to introduce more VAT rates, political populism…?

THE RAVEN: I think that weak institutions at all levels are a key problem, because we cannot expect efficient work and solving all other mentioned problems (legal uncertainty, uncoordinated tax system, many bad laws, including the one on public procurement, etc.) from incompetent and unprofessional party henchmen. employed exclusively according to the criterion of eligibility and completely dependent on the will and interest of those who employed them instead of citizens and the state. With such incompetent and inefficient institutions, the governing structures offer us the most primitive political populism and diversion from real problems such as pandemics, corruption and economic crisis, which all together cumulatively lead to further collapse of the already dysfunctional system, deterrence of potential foreign investors and emigration.

CAPITAL: Bojana Ninković

Source: – Informacija je capital by

*The article has been translated based on the content of – Informacija je capital by If there is any problem regarding the content, copyright, please leave a report below the article. We will try to process as quickly as possible to protect the rights of the author. Thank you very much!

*We just want readers to access information more quickly and easily with other multilingual content, instead of information only available in a certain language.

*We always respect the copyright of the content of the author and always include the original link of the source article.If the author disagrees, just leave the report below the article, the article will be edited or deleted at the request of the author. Thanks very much! Best regards!