Governor of the Central Bank of Bosnia and Herzegovina, Jasmina Selimović, speaks to Global Finance about the bank’s priorities and biggest challenges.
Global Finance: You are Bosnia and Herzegovina’s first female central bank governor. How important is this, and how have you defined your priorities?
Jasmina Selimović: It makes me proud but also very aware of the huge responsibilities that this honorable duty carries. In a modern society, women holding leadership positions is not unusual. But in central banking, according to the IMF, 29 women are central bank governors in just 16% of the world’s 185 central banks. There is still a long way to go.
Regarding priorities, we will stay focused mainly on preserving the currency board and the stability of the institution. The work method, defined by the Law on the Central Bank of Bosnia and Herzegovina, clearly defines the parameters of monetary policy, as well as the currency board arrangement. The CB must keep its independence, integrity and professionalism. The currency is stable and convertible, those being the preconditions for financial stability and economic prosperity. As the owner of the RTGS [Real Time Gross Settlement] and GIRO [General Interbank Recurring Order] clearing systems, we will continue to ensure the stability of payment systems.
Looking ahead, we will invest particular attention in connecting with the central banks of the region and of Europe. We will continue to fulfill commitments toward European integration, which will become increasingly complex. We already participate in the preparation of analytical publications, such as the ECB’s financial stability assessment for EU candidate countries and the European Commission’s annual report.
GF: Having a currency board links your currency to the euro. What precisely does this mean for day-to-day operations?
Selimović: Our currency is pegged to the euro at 1.95583, a rate derived from the previous exchange rate of one German deutsche mark to one Bosnian convertible mark [BAM]. Our main objective is stability, reflected in the currency board mechanism, which is strict and conservative. This means that every single BAM is at least 100% covered by foreign exchange reserves, so convertibility is unquestionable. In operations, this means that our main units [in Sarajevo, Banja Luka, Mostar and branches in Brčko and Pale] carry out daily transactions at the above-mentioned fixed rate. These transactions affect the level of the foreign exchange reserves, which is consequently reflected in the portfolio managed on daily basis by the CB.
It is very important that we are able at any moment to fulfill any request by our commercial banks to buy currency or sell it to them, as convertibility is granted by the law. Our main objective is maintaining the stability of the domestic currency, which requires safe and prudent management of the foreign exchange reserves.
GF: One of the biggest challenges for BH has been poor transparency and corruption, listed 110th out of 180 countries in Transparency International’s 2022 report. Where is it now, and what can the CB do to improve things?
Selimović: Based on the Corruption Perceptions Index from the 2023 TI Report, BH is in 108th place, so it has not recorded much progress. We must make significant steps in resolving corruption and strengthening the judiciary.
At the CB, we apply EU corruption prevention standards. We monitor business compliance to prevent conflicts of interest, corrupt actions and other risks that may result in financial losses or undermine our reputation. Our work impacts the entire financial system of the country, so public trust is extremely important to us, especially in times of crisis.
Related to this, we have introduced a Code of Ethics to prevent conflicts of interest and to enable online reports of any corruption or irregularities in the work of the CB. The system is independent and protected, and the CB’s determination to strengthen integrity and ethics enabled it to win the prestigious Transparency category in the 2023 Central Banking Awards.
GF: How serious a problem is slowing economic growth, 2% in 2023, and what can do done to boost it?
Selimović: The slowdown of economic activity in the EU, as well as global geopolitical tensions, led to a decrease in our exports. Domestic industrial production and exports declined significantly in 2023, while in the first five months of 2024, these declined by an additional 5.7% and 8.5%, respectively. Furthermore, competitiveness in past two years was undermined by a high growth in labor costs and low productivity. Structural reforms are necessary to boost domestic economic growth and harmonize it with the EU.
