prijava
SARAJEVO, April 7 (FENA) - Andrew Jewell, the International Monetary Fund (IMF) Resident Representative in Bosnia and Herzegovina, said in Sarajevo today that, recently there have been public calls for the Central Bank of Bosnia and Herzegovina (CBBH) to use excess reserves to fight the COVID-19 crisis.
"These calls are misguided. While it is true that the CBBH held KM 2.45 billion in banks’ excess reserves at end-March
2020, this money does not belong to the central bank. Rather, it belongs to the commercial banks in BiH. These banks have chosen to place this money at the CBBH but are free to use it for other purposes, including lending it to the economy. The CBBH cannot dictate how commercial banks use their excess reserves," stressed Jewell.
There have also been public calls for the CBBH to reduce the required reserve ratio, which currently stands at 10 percent. This is a legitimate policy option that the CBBH may choose to exercise at some point, as it has done in the past – for example, during the 2008-09 global financial crisis.
Lowering the required reserve ratio would mean that some of the money that banks are currently required to keep at the CBBH would become excess reserves and therefore would be available for banks to lend. But banks already have ample excess reserves, and having more excess reserves would not necessarily induce them to lend more.
As noted in previous statements, any attempt to use the CBBH’s assets – its international reserves – for fiscal purposes would undermine the currency board. Currently, the CBBH could exchange every single KM into euros, if there were demand for this, because the KMs issued are fully backed by euro assets. This makes the currency board safe.
If the currency board collapsed, the KM would lose value against the euro, and borrowers with debt in euros, or debt linked to euros, would suddenly face heavier debt burdens. The country would face a currency and financial crisis on top of the grave health and economic crisis caused by the pandemic," Jewell warned in a press release, the IMF's Office of Resident Representative in BiH stated.
(FENA) S. R.
