Governor of the CBBH at a high-level conference in Brussels

The Governor of the Central Bank of Bosnia and Herzegovina (CBBH), Jasmina Selimović, Ph.D. participated in the conference of Central Bank Governors of the Belgian-Dutch Constituency of the International Monetary Fund (IMF) held in Brussels, where she spoke about global financial trends, fiscal risks and the importance of preserving the independence of central banks in contemporary macroeconomic conditions.

On the panel dedicated to monetary policy and the challenges that central banks face in conditions of global uncertainty, Governor Selimović spoke about whether and how monetary policy should react in conditions of constant political and economic uncertainty.

She pointed out that the independence of the central bank is the basis of macroeconomic stability and a key prerequisite for preserving the stability of prices and the financial system. The institutional, operational and financial autonomy of the central bank must be protected from short-term political and fiscal pressures, because only an independent monetary authority can make decisions in the best interest of long-term stability.

In this context, she emphasized that even countries that are considered moderately indebted can enter the zone of increased risk if they are exposed to political uncertainty and growing budgetary needs. Irresponsible or unpredictable fiscal policy can create an environment in which the independence of the central bank is questioned, which in the long run undermines market confidence and financial stability.

The Governor pointed out that a weaker US dollar can encourage the inflow of capital to developing countries, but that such money flows can lead to excessive borrowing, increased exposure to currency risk and increased sensitivity to sudden changes in global financial conditions.

She particularly pointed out the importance of preserving the independence of central banks. As measures that central banks themselves can take in order to preserve their independence and at the same time ensure the credibility of the policy, she mentioned increasing the transparency of the central bank by using the IMF Central Bank Transparency Code, stress tests of the central bank's balance sheet positions, and improving operational efficiency.

“A transparent and clearly communicated monetary policy is key to the stability of prices and the financial system. However, this may not be enough, if the perception of the independence of monetary institutions is undermined as a result of bad fiscal policy, non-implementation of structural reforms or institutional instability,” Governor Selimović said on this occasion.

It was concluded that fiscal discipline, greater transparency of public borrowing and preserving the credibility of central banks are key to long-term macroeconomic stability and investors’ confidence.