BOSNIAN CENTRAL BANK PRESENTED FINANCIAL REPORT FOR 2007

SARAJEVO, Bosnia (April 19,2008) - In 2007, the Bosnian Central Bank has achieved record results.According to the financial results, the Bosnian Central Bank ended 2007 with foreign reserves amounting to 6,7 billion Bosnian Marks, representing the increase of more than 1,2 billion Bosnian Marks, or of 22,9% in comparison with 2006. Net free reserves as of December 31, 2007, amounted to 393,7 million Bosnian Marks,the Bosnian Central Bank said yesterday.

In the last year, the Bosnian Central Bank also achieved the largest profit recorded so far in the amount of 142,6 million Bosnian Marks, of which 59,9 million Bosnian Marks was transferred to the Bosnian state budget at the beginning of April 2008.

In accordance with international standards, analyses were performed within the Bosnian Central Bank Financial Reports, which show exposure and sensibility to market risks.

The analyses have shown that the Bosnian Central Bank has satisfying liquidity, which means that Bank’s liabilities are adequately covered with liquid assets.

Analyses also show that the bank was not exposed to larger market risks during the process of investment of foreign reserves, such as exchange rate related risks, interest fluctuations risks or credit risk, the Bosnian Central Bank said.

Positive operations of the CBBH were also confirmed by the external auditing company Deloitte, stressing that the Bosnian Central Bank Financial Statements for 2007 were reliable and accurate.

As the fiscal agent to the state, the Bosnian Central Bank has regularly serviced foreign obligations which amounted to 3,9 billion Bosnian Marks at the end of 2007. The total amount of foreign debt has reduced by 167,2 million Bosnian Marks, or by 4,1% compared to 2006.

The year ended with the Decision of the CBBH Governing Board on increase of reserve requirement rate for commercial banks from 15% to 18%, in order to slow credit growth. This Decision is implemented from the beginning of this year.

During 2007, a rapid increase of FDI inflow in Bosnia was recorded. In accordance with the Bosnian Central bank estimates, FDI in 2007 amounted to close to 2,9 billion Bosnian Marks. The reason for such significant inflow of FDIs was realization of the large privatization agreements during 2007.

The year was also marked by several negative economic indicators – 4,9% inflation at the annual level, measured in December 2007 in comparison with December 2006, followed by stopping of downward trend of interest rates in Bosnia, as well as, worsened Balance of Payments position.

Foreign trade imbalance still represents one of weaknesses of the Bosnian economy, considering the level of the current account deficit, which is present for several years already. This is the consequence of transition which Bosnia is passing through, but also of the external factors, on which Bosnia cannot influence.

General increase of the current account deficit in Bosnia is the consequence of the large increase of foreign trade deficit in 2007 and, in essence, 8 billion Bosnian Marks foreign trade deficit can be easily identified as the main cause of the current account imbalance. Reasons for worsening of the foreign trade deficit are large increase of imports in some branches, as well as, in the general increase of goods prices.
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