IMF Mission: Structural reforms needed in Bosnia and Herzegovina to strengthen competitiveness

It was emphasized that advancing EU-related reforms, improving governance, accelerating energy sector transformation, and addressing constraints to investment will be critical to support stronger, more sustainable growth and convergence.

The Mission stated that growth is slowing and inflation is rising, with higher energy import costs and weaker EU demand weighing on activity.

''Over the medium term, growth is expected to recover gradually but remain insufficient to support meaningful convergence with the EU absent stronger structural reforms. Risks are tilted to the downside; faster progress on EU-related reforms could provide upside,'' they stated.

Fiscal policy remains expansionary, contributing to rising deficits and debt, inflationary pressures, and declining fiscal buffers.

The Mission believes that the authorities should refrain from discretionary measures that would further increase the fiscal deficit in 2026 and use unspent resources or revenue overperformance to rebuild buffers.

Credible and sustained fiscal consolidation, supported by structural fiscal reforms, is needed to ensure sustainability, rebuild buffers, and create space for priority spending.

The Mission stressed that safeguarding the currency board arrangement and the central bank’s institutional independence is essential for macroeconomic stability.

The banking sector is well capitalized and liquid, but vigilance is needed to monitor risks from rapid credit growth and evolving financial conditions.

Strengthening crisis preparedness, advancing macroprudential tools, phasing out distortionary measures in favor of market-based instruments, enhancing payment systems, and addressing AML/CFT deficiencies are key priorities, announced the IMF Office in BiH.