IMF Staff Country Reports

Heightened political tensions are slowing reforms and progress toward EU
accession. Growth has been resilient, but inflation has accelerated recently following a
rapid decline in 2024. Fiscal policy in 2025 has turned expansionary, driven by
discretionary measures; spending composition has deteriorated. Larger deficits in both
entities (FBiH, RS) are expected to be financed mainly through foreign borrowing. The
currency board (CBA) coverage ratio continues to rise, and the financial sector remains
healthy and profitable amid high household credit growth. Nevertheless, central bank
independence is under pressure. Furthermore, large increases in the minimum wage risk
undermining competitiveness and encouraging labor market informality.