IMF Executive Board Concludes 2025 Article IV Consultation with Bosnia and Herzegovina
FOR IMMEDIATE RELEASE
- Growth has remained resilient despite a challenging environment and is projected at 2.4 percent in 2025. Downside risks are elevated, including trade tensions, weaker external demand, heightened domestic political tensions and policy slippages ahead of the 2026 elections.
- Fiscal policy should focus on medium-term consolidation, rebuilding buffers, and improving the quality of public spending, supported by a strong structural reform agenda.
- Safeguarding central bank independence, strengthening its policy toolkit, enhancing macroprudential oversight, and closely monitoring financial sector risks are essential to preserving the currency board arrangement and ensuring financial stability.
Washington, DC – August 29, 2025: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Bosnia and Herzegovina on August 27, 2025.[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.
Growth has remained resilient despite domestic and global challenges. It accelerated to 2.5 percent in 2024 (2023: 2.0 percent). While political uncertainty dampened Q1 consumption, high-frequency indicators point to a recovery from Q2, with growth expected to ease slightly to 2.4 percent in 2025 before returning to its potential of 3 percent by 2027, driven by consumption and exports. After rapidly receding to 1.7 percent in 2024 (2023: 6.1 percent), average headline inflation picked up to 2.3 percent in May 2025, while core inflation remained broadly stable at about 4 percent. Inflation is forecast to rise to 3.8 percent in 2025 due to higher imported food prices, before stabilizing at 2 percent over the medium term.
The external position is expected to remain broadly unchanged in 2025, while credit growth is projected to moderate somewhat. The current account deficit is expected to widen to 4.1 percent of GDP, from 4.0 percent of GDP in 2024, with a recovery in electricity exports after last year’s droughts, and lower oil prices offsetting adverse effects of U.S. tariffs on exports. Gross international reserves reached €9 billion, 6.9 months of imports, providing adequate coverage for the currency board arrangement. Private credit growth is projected to slow to 7.7 percent in 2025, slightly outpacing nominal GDP growth.
The outlook is subject to downside risks. Trade uncertainty, a slowdown in Europe, volatile commodity prices, tighter global financial conditions, and further escalation of political tensions pose significant downside risks to growth. Strong growth in real wages and private sector credit could put upward pressure on inflation. Policy slippages ahead of the 2026 elections could worsen the fiscal position and the current account deficit. On the upside, progress on EU accession would boost investor confidence and growth.
Executive Board Assessment[2]
Executive Directors agreed with the thrust of the staff appraisal. They noted that, while growth has remained resilient amid a challenging domestic and external environment, it continues to fall short of potential, hindering Bosnia and Herzegovina’s swift convergence with the EU. Given elevated downside risks, Directors underscored the importance of maintaining political stability, avoiding policy slippages, and leveraging the EU accession process to accelerate reforms. Continued strong engagement with capacity development partners will be critical to support this process.
Directors concurred that fiscal policy should prioritize medium-term consolidation while rebuilding fiscal buffers, broadening the revenue base, and enhancing the efficiency of public spending. In the near term, it is essential to avoid further deficit-widening actions and to strengthen contingency planning. To bolster policy credibility, Directors called for upgraded fiscal frameworks, with greater harmonization and stronger monitoring and enforcement of fiscal rules. Reforms are also needed in public sector employment, wages, and social benefits, as well as in public investment management, procurement processes, fiscal risk oversight, and the governance of public enterprises.
Directors underscored the importance of safeguarding central bank independence and further strengthening the central bank’s policy toolkit to preserve the credibility of the currency board arrangement, which remains an anchor of stability. They called for close monitoring of financial stability risks associated with rapid credit expansion, as well as for enhancements in the macroprudential framework. Directors stressed the need to enhance crisis preparedness, including through the establishment of a country-wide financial stability fund to support bank restructuring. They also supported the phasing out of temporary distortive regulatory measures and urged a joint commitment to undertake a Financial Stability Assessment Program (FSAP).
Directors emphasized the importance of advancing structural reforms under the EU Growth Plan to support EU accession and unlock faster, more sustainable economic growth. They highlighted that energy sector reforms—including phasing out electricity subsidies, improving the operational efficiency of state-owned energy enterprises, and introducing a carbon pricing system—are essential to attract private investment and position the sector as a long-term growth driver. Directors also stressed the need for reforms to boost labor force participation, reduce informality, advance digitalization, and strengthen governance and anti-corruption efforts. They underscored the urgency of effectively implementing MONEYVAL priority actions to avoid grey-listing and to secure further growth dividends.
| Table 1. Bosnia and Herzegovina: Selected Economic Indicators, 2020-2030 | |||||||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |
2030 |
|
| Prel. | Projections | ||||||||||
| Nominal GDP (KM billion) | 34.7 | 39.1 | 45.6 | 49.9 | 52.8 | 56.4 | 59.5 | 62.7 | 66.0 | 69.4 | 72.9 |
| Gross national saving (in percent of GDP) | 19.7 | 23.7 | 23.1 | 23.5 | 25.3 | 25.2 | 25.3 | 25.2 | 25.2 | 25.2 | 25.1 |
| Gross investment (in percent of GDP) | 22.6 | 25.4 | 27.4 | 25.8 | 29.3 | 29.3 | 29.1 | 29.1 | 29.0 | 29.0 | 29.0 |
| (Percent change) | |||||||||||
| Real GDP | -3.0 | 7.4 | 4.2 | 2.0 | 2.5 | 2.4 | 2.7 | 3.0 | 3.0 | 3.0 | 3.0 |
| GDP deflator | 0.1 | 5.0 | 11.8 | 7.3 | 3.2 | 4.3 | 2.8 | 2.3 | 2.2 | 2.1 | 2.0 |
| CPI (period average) | -1.1 | 2.0 | 14.0 | 6.1 | 1.7 | 3.8 | 2.6 | 2.0 | 2.0 | 2.0 | 2.0 |
| Money and credit (end of period) | |||||||||||
| Base money | 10.7 | 17.4 | 3.3 | -1.7 | 5.2 | — | — | — | — | — | — |
| Broad money | 7.1 | 12.4 | 5.5 | 7.7 | 9.3 | — | — | — | — | — | — |
| Credit to the private sector | -2.8 | 4.0 | 4.9 | 7.4 | 9.3 | — | — | — | — | — | — |
| (Percent of GDP) | |||||||||||
| Operations of the general government | |||||||||||
| Revenue, of which: | 40.9 | 40.5 | 39.5 | 40.0 | 42.0 | 42.8 | 42.5 | 42.5 | 42.5 | 42.5 | 42.5 |
| Taxes | 21.5 | 22.0 | 21.8 | 21.9 | 23.0 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 |
| Social security contributions | 15.5 | 14.8 | 14.2 | 14.8 | 15.5 | 15.8 | 15.8 | 15.8 | 15.8 | 15.8 | 15.8 |
| Expenditure | 45.4 | 40.6 | 39.4 | 41.7 | 43.9 | 45.4 | 45.4 | 45.4 | 45.2 | 45.2 | 45.2 |
| of which: Investment expenditure | 5.4 | 4.1 | 3.8 | 4.0 | 4.4 | 4.8 | 4.8 | 4.8 | 4.8 | 4.8 | 4.8 |
| Fiscal balance | -4.5 | -0.2 | 0.1 | -1.7 | -1.9 | -2.6 | -2.9 | -2.8 | -2.7 | -2.7 | -2.7 |
| Primary fiscal balance | -3.8 | 0.5 | 0.8 | -0.8 | -0.9 | -1.7 | -1.7 | -1.6 | -1.5 | -1.4 | -1.3 |
| Total general government debt | 37.2 | 35.8 | 31.2 | 29.0 | 29.9 | 31.3 | 32.2 | 33.1 | 34.1 | 34.9 | 36.1 |
| Domestic general government debt 1/2/ | 11.1 | 9.1 | 8.2 | 9.2 | 10.3 | 10.8 | 12.8 | 14.7 | 16.6 | 18.2 | 19.9 |
| External general government debt | 26.2 | 26.7 | 23.0 | 19.7 | 19.6 | 20.4 | 19.4 | 18.4 | 17.5 | 16.7 | 16.2 |
| (Percent of GDP) | |||||||||||
| Balance of payments | |||||||||||
| Exports of goods and services | 34.6 | 42.5 | 48.3 | 43.9 | 41.6 | 40.9 | 39.3 | 39.0 | 38.8 | 38.7 | 38.5 |
| Imports of goods and services | 48.0 | 53.8 | 61.9 | 55.7 | 55.5 | 54.6 | 52.8 | 52.6 | 52.4 | 52.3 | 52.1 |
| Trade balance | -13.4 | -11.3 | -13.6 | -11.8 | -13.9 | -13.7 | -13.5 | -13.6 | -13.6 | -13.6 | -13.6 |
| Current account balance | -2.8 | -1.8 | -4.4 | -2.3 | -4.0 | -4.1 | -3.8 | -3.9 | -3.9 | -3.9 | -3.9 |
| Foreign direct investment (+=inflow) | 2.0 | 2.7 | 3.1 | 3.4 | 3.6 | 3.2 | 3.3 | 3.3 | 3.3 | 3.3 | 3.3 |
| Gross official reserves (Euro million) | 7,105 | 8,382 | 8,276 | 8,443 | 8,992 | 9,670 | 10,191 | 10,615 | 11,050 | 11,539 | 12,055 |
| (In months of imports) | 7.9 | 7.0 | 7.0 | 6.8 | 6.9 | 7.2 | 7.2 | 7.2 | 7.2 | 7.1 | 7.1 |
| External debt 3/ | 63.0 | 57.7 | 51.9 | 48.0 | 48.3 | 48.6 | 47.4 | 46.5 | 45.6 | 45.0 | 44.7 |
| Memorandum Items: | |||||||||||
| Unemployment rate (national definition) 4/ | 15.9 | 17.4 | 15.4 | 13.2 | 12.6 | — | — | — | — | — | — |
| GDP per capita (in euros) | 5,092 | 5,750 | 6,716 | 7,368 | 7,811 | 8,369 | 8,859 | 9,361 | 9,881 | 10,420 | 10,987 |
| Output gap (in percent of potential GDP) | -4.1 | 0.3 | 1.7 | 0.8 | 0.4 | 0.0 | -0.2 | -0.1 | 0.0 | 0.0 | 0.0 |
| REER (Index 2016=100) | 98.7 | 98.5 | 102.4 | 103.6 | 102.9 | — | — | — | — | — | — |
| NEER (Index 2016=100) | 115.9 | 117.1 | 117.4 | 120.4 | 122.4 | — | — | — | — | — | — |
| Sources: BiH authorities; and IMF staff estimates and projections. | |||||||||||
| 1/ On average, half of the domestic debt stock is indexed to the Euro. | |||||||||||
| 2/ The stock of general government domestic debt does not include domestic arrears and those of public enterprises. | |||||||||||
| 3/ Includes inter-company loans in private external debt. | |||||||||||
| 4/ The 2021 unemployment rate is not comparable with 2020 due to redesign of BHAS Labor Force Survey (LFS) methodology in line with EU regulations. | |||||||||||
[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
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