S&P affirmed its 'B/B' long and short-term foreign and local currency sovereign credit ratings of Bosnia and Herzegovina. The outlook is stable.
In their overview, the analysts of Standard & Poor’s Ratings Service have said that the ratings of Bosnia and Herzegovina are constrained by their view of its fragile, overlapping government institutions, its weak fiscal management framework, and its vulnerable external position arising from persistent current account deficits. On the other hand, the ratings are supported by the expectation of continued and significant international support.
S&P´s analysts expect that a new joint programme between the EU, the IMF, and the authorities could be in the offing. Their opinion is that such a program would aim to prioritize socioeconomic reforms, marking a shift in the EU's position away from politically sensitive constitutional change, which BiH policymakers have been unable to deliver. Much like the Stand-By Arrangement with the IMF that expired in June 2015, S&P expects disbursements linked to conditions to provide an important policy anchor, as much as an important source of financing for BiH's external deficit.
The Parliament of Bosnia and Herzegovina in February endorsed a written commitment pledging the intention of all political parties to reform. This allowed the Stabilization and Association Agreement, which Bosnia and Herzegovina signed in 2008, to come into force, paving the way for additional EU financial and technical assistance to be made available to Bosnia and Herzegovina, which is the most progress the country has made toward its EU aspirations over the past half-decade, reported S&P. The reform agenda has since been ratified in the Parliaments of both entities.
The stable outlook is based on S&P´s expectation that Bosnia and Herzegovina will continue to receive stable creditor support.
The rating could be lowered in case Bosnia and Herzegovina does not ensure the timely external financing of its budget deficits. S&P will consider raising the credit rating in case of strengthening of the business environment, creating conditions for more sustainable growth and better external performance of Bosnia and Herzegovina.
Global Securities Services Bosnia and Herzegovina