Bosnia and Herzegovina - Overview of economy

Prior to becoming independent in 1992, Bosnia and Herzegovina was the second poorest republic in the former Socialist Federal Republic of Yugoslavia. Before the inter-ethnic war (1992-95), the economy was devoted to mining, forestry, agriculture, light and heavy manufacturing, and particularly armaments. Unlike many Eastern European countries, Bosnia and Herzegovina's farmland was never collectivized by the communist regime. Agriculture was insufficiently developed, and the country

heavily imported food, while its military industry was overstressed. The breakup of old Yugoslavia, the disruption of traditional markets and economic links, and the savage civil war caused industrial and agricultural output to plummet by four-fifths by 1995. Since 1996, production has recovered somewhat; however, the gross domestic product (GDP) remains far below its pre-war level.

By the time the civil war broke out in Bosnia and Herzegovina, the inflation rate was about 120 percent. During the war, inflation skyrocketed to over 1,000 percent. Unemployment was about 30 percent when the war began, but by 1995, it rose to 75 percent. All sectors of the economy were badly hurt, and 45 percent of industrial plants and 75 percent of the oil refineries were incapacitated.

When the war ended in 1995, the country was united under a federal government but split into 2 legal entities: the Federation of Bosnia and Herzegovina and the Republika Srpska (The Serb Republic). The end of fighting made some recovery possible, especially in construction, trade, services, and traditional light industries. The division between the Federation and the Serb Republic proved to be a significant obstacle to reconstruction. The Serb Republic included most of the agricultural land and mineral deposits. In contrast, most heavy industry and power plants were within the Federation. This division made the most basic economic functions, such as the distribution of electricity, dependent on good cooperation between the once warring entities.

Economic data on each of Bosnia's 2 units are of little use because they do not reflect the black market , and national-level statistics are not published. The country's external debt was estimated at US$3.2 billion in 2000 and US$1.2 billion of international aid is now being pledged to help the country's finances. Bosnia also receives substantial reconstruction assistance and humanitarian aid from the international community.