Bosnia's beacon of stability

• Author: Jeremy Clift
• Position: IMF External Relations Department
• Pages: 121-131

Page 121

Under Peter Nicholl, the New Zealand economist appointed by the IMF to head the Central Bank of Bosnia and Herzegovina, the central bank masterminded the introduction of a new currency, spearheaded the consolidation of the banking sector, and put in place a modern payment system. Indeed, the bank has come to be seen as a beacon of stability in a country still recovering from conflict. Nicholl talks about his accomplishments and the outlook for Bosnia's economy.

Page 130

Creating a beacon of stability in Bosnia

Almost ten years after the Dayton agreement heralded peace in the Balkans, Bosnia and Herzegovina (BiH) has made big strides toward economic recovery. Infrastructure has been rebuilt, many refugees have returned home, output has revived, and inflation has stabilized at industrial country levels.However,many other problems remain in a country still marked by the scars of conflict-GDP is well below prewar levels, unemployment is high, the large current account deficit is a source of uncertainty, and the private sector remains weak. One bright spot is the central bank, established in 1997 with backing from the IMF. Jeremy Clift interviews Peter Nicholl, a New Zealander appointed by the IMF to be governor of the Central Bank of Bosnia and Herzegovina (CBBH).

"We started with foreign exchange reserves covering just one week of imports," recalls Nicholl. "Today they cover five months worth of import payments, inflation is stable, and we have a sound banking system."

Under Nicholl, the central bank masterminded the introduction of a new currency, spearheaded the consolidation of the banking sector, and put in place a modern payment system.

Indeed, it has come to be seen as a beacon of stability in a country still recovering from conflict.

Part of the credit for this strong performance goes to Nicholl, a 61-year-old New Zealand-born economist who headed the CBBH for seven years until he stepped aside at the end of 2004.

Under the terms of the Dayton accord, the IMF was charged with appointing the governor of the new central bank. To minimize ethnic rivalries among Bosniacs, Croats, and Serbs, the law establishing the bank specified that for the first six years the governor should not be a citizen of Bosnia and Herzegovina or a neighboring country. Nicholl, an Executive...