Blocked bank accounts threaten BiH economy

05/12/2012

Blocked bank accounts, because of debts and financial irregularities, have an effect on BiH society.

By Ana Lovakovic for Southeast European Times in Sarajevo -- 05/12/12

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Nearly 36,000 accounts are blocked by the Central Bank of Bosnia and Herzegovina. [AFP]

The Central Bank of Bosnia and Herzegovina (BiH) published a list of nearly 36,000 organisations and businesses whose bank accounts are blocked, a growing trend that can have potentially catastrophic effects on BiH's troubled economy, analysts said.

The blocking of bank accounts affects organisations in every segment of society from small service providers to industrial producers, government institutions and political parties.

"Many companies got into trouble because of a chain reaction in which everyone owes everyone. Under such conditions, one company pulls another one into debt," Igor Gavran, an expert in macro-economics at the Foreign Trade Chamber of BiH, told SETimes.

Banks said accounts are blocked mostly due to outstanding debts to businesses, banks and BiH's internal revenue service, but also because of financial transaction irregularities.

BiH law stipulates that firms whose accounts are blocked for over 60 days must file for bankruptcy. The bankruptcy proceedings can be initiated by the creditor, claimant or the fund's owner.

"We are now in a situation where a large number of commercial enterprises face bankruptcy or even liquidation," Ranko Milic, chairman of the Employers Union Association in Republika Srpska, told SETimes.

Milic said that organisations have for years been unable to pay liabilities without facing consequences. Internal debt has grown to such an extent -- half a billion euros in Republika Srpska alone -- that it has become virtually impossible to do business.

"Doing business is like walking a tightrope and juggling at the same time," Husein Hasibovic, general manager of state-owned enterprise Zrak, whose four bank accounts were blocked, told SETimes.

The central bank announced it will update the list of organisations with blocked bank accounts monthly, and will introduce new information, such as aggregate debt of these companies and institutions.

The number of organisations with blocked accounts is so high, and the effects so pervasive, some analysts argue that only a comprehensive approach can turn the situation around.

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"Under the existing conditions of disrupted liquidity, the BiH authorities should finally make a move and at least allow companies to pay VAT on purchased, not on invoiced realisations," Milic said.

The government must immediately prescribe rigorous measures for debtors and finally introduce the terms and methods of payment obligations, said Jargo Lasic, vice president of the Chamber of Commerce of FBiH.

"Firm owners who buy and resell goods and do not pay their bills can not be regarded as businessmen, but as thieves. We have a paradoxical situation that companies which settle obligations to the state and its business partners experience difficulties, while the so-called businessmen that do not pay create business empires," Lasic told SETimes.

Other regional countries face the same problem though smaller in scope. In Serbia there are 2,700 firms with blocked accounts.

This content was commissioned for SETimes.com.
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