Kleptomaniac attack on the banking sector

By: Prof. Dr. Izudin KEŠETOVIĆ

The latest or consequential developments in the smaller entity of Bosnia and Herzegovina have their own logic, which has been brought to an absurd level. The situation is the same in the other entity of BiH. However, here the logic of things takes on a different absurdity. For any diligent analyst, things will be clear.

In the first case, the entity of Republika Srpska wants to borrow 300 million from "Global Bancorp Commodities & Investment". Namely, the portal CAPITAL previously reported that the headquarters of this investment fund is located in a shopping mall in Florida. The GBCI fund was established on April 24, 2014, and there is very little information about it on the Internet.

The latest news from the same source is that "the contract was terminated by the Government of RS with the official explanation from the Minister of Finance that the deadline for withdrawing that money had expired." To recall, it was about replacing a failed Russian loan after the return of the President of RS from Moscow. Let's also recall the president's words that "this loan is very favorable, although, he says, there will certainly be 'noise' from some due to this borrowing, but it will ensure the stability of its finances."

Everything is happening in parallel with the collapse of banks under the supervision of the Banking Agency of RS and the emptying of money from the accounts of the Deposit Insurance Agency of Bosnia and Herzegovina. The whole story is related to an orchestrated attack on the Central Bank of BiH by those who do not understand the principle of the Currency Board, and who would invest billions from mandatory foreign exchange reserves in their private projects. Appetites for money from surplus foreign exchange reserves exist from all "three sides", regardless of how naive or malicious they may seem.

The latest attack on the Central Bank's money is expressed as an "appetite" to "appropriate" surplus funds above 100 percent coverage of monetary liabilities in reserve currency, i.e., foreign convertible currency; without knowing that every system that guards it must have so-called "double" keys or mandatory reserves. Everyone forgets the so-called monetary effects that spill over into the budget through the distribution of monetary profit. The essence is that the authorities have set their sights on hundreds and billions of convertible money of the population and economy.

That the story is also related to the other entity is best seen in the latest reform trick that has nothing to do with what is written in the document, and concerns taxes. This refers to the increase in excise duties on high-tariff products in order to service loan obligations for investments in road infrastructure. All explanations for the justification of such a move border on madness in the sense that "some one hundred and several tens of millions of KM need to be provided from excise duties on liquid fuels, because the debt cannot be settled from excise duties on coffee and alcohol, in order to further encourage tax evasion".

The story actually has another side with a different sign of public: internal and external debt and the growth of deficits on the current accounts of the country, where deficits are recorded, instead of surpluses that would be directed into investments in the private and public sectors.

The essence of the developments in the monetary and fiscal sector in Bosnia and Herzegovina could clearly be compared to the not-so-distant events that occurred in our neighboring country, Serbia, and the then-SR Yugoslavia, when the boss Jezda (Jezdimir Stanković) was rampant, about which Mlađan Dinkić wrote the book "Great Swindles". Let's recall that terrible scenario from 1992, 1993, and 1994, when inflation grew year after year; month after month and day after day, until on January 24, 1994, the dinar was denomiated by nine zeros. At that time, prices rose by 62% daily or 2% per hour or 0.029% per minute.

In the entire story of hyperinflation from the time of monetary chaos of a disintegrating state, Montenegrins appeared with the proverb: "If we are brothers, our wallets are not shared."

This in the asymmetric organization of the state of Bosnia and Herzegovina, where monetary policy is at the state level, fiscal at the entity and Brčko District level, only seems naive at first glance.

In a political sense, invoking a referendum has the primary goal of destabilizing the state.

In an economic sense, undermining the banking system and attacking monetary authority aims at a goal that can be justified by the kleptomaniacal manners of the new boss Jezda, or by the destruction of the Central Bank as the last refuge of the statehood of Bosnia and Herzegovina, which would lead to general chaos.

All attempts to extract as much money as possible from taxes have the sole purpose of prolonging the life of the large voting clientele that has accumulated in public administration, public enterprises, and institutions.

The fight for ministerial seats and director positions in public institutions and enterprises has the sole purpose of gaining control over public money flows. No one is counting the losses of public enterprises and institutions anymore, nor the enormous costs of unproductive administration.

The loss of credibility of the financial sector will be "invoiced" at the price of capital, which we desperately need.

And while the real sector is struggling due to illiquidity and difficulty maintaining its reproductive capacity, all eyes of the authorities are focused on banks, funds, and accounts from which they are squandering money. Thus, the two entity banks have become a mockery of the intention and need to provide potential for new investment endeavors. Everything that happened in these so-called development banks has been erased by the practice of loans based on the principle of "own piggy bank" by the leading cadres who know how to fulfill the wishes of their leaders.

The loss of credibility of the state of Bosnia and Herzegovina is disastrous and is at the expense of political elites, who instead of acting statesmanlike, are taking on the characteristics of kleptomaniacs.

Therefore, no serious analyst can overlook that everything is happening around the "hodža's quilt". That quilt is clearly filled with money instead of feathers.

And until these things are determined around the "quilt", especially how much "scattered feathers" there are, there will be no fundamental reforms.

Therefore, the reforms we were looking forward to have started in reverse. The intention was to discourage and silence the potential social stratum that is on the margins or below the social subsistence level. These are workers and pensioners. Tomorrow it will be students, police officers, doctors, professors, and finally everyone.

The kleptomania of the authorities knows no bounds. It cannot stop itself.

Therefore, it becomes dangerous as a phenomenon and dangerous for any democratic, civilized society.