The Central Bank of BiH sold more than a Ton of Gold foreign Exchange Reserves?

It was found out that the Central Bank of Bosnia and Herzegovina (BiH) recently sold 40.000 ounces of gold (32.000 ounces is one ton), which is more than a ton of gold in foreign exchange reserves.

This was done due to market movements, i.e. the fall in the value of gold and the strengthening of the dollar. However, the question of responsibility arises, that is, who made the decision about it.

It is already known that in eight months of this year, the capital of the Central Bank fell by 262 million BAM. Earlier, the Central Bank explained this with inflation, i.e. an increase in the interest rate of the European Central Bank, which led to a fall in the value of government securities. And about 70 percent of the state’s foreign exchange reserves are invested in securities, which are considered a safe form of property.

The answer to the question why it is so should be given by financial experts. Is it a poorly structured portfolio, could it have been better invested, or is the key reason a ruthless market?

The Central Bank confirmed that they sold a certain amount of gold.

“You are correctly informed that the Central Bank of BiH sold a part of the gold that we had in the portfolio. This was done in accordance with the mandate defined by the Law and in the best interest of the Central Bank of BiH on the basis of detailed analyzes and projections. In the period from 2009 to 2022, the Central Bank of BiH undertook a series of transactions the purchase and sale of gold, as well as the transaction of purchase and sale of securities, and term deposits, all with the aim of diversifying the portfolio of foreign exchange reserves and preserving the arrangement of the currency board. The Central Bank of BiH monitors market trends on the basis of which it makes investment decisions,” this institution stated.

How wise it is to sell gold as a safe investment medium is a question for experts. It is clear that in the financial market there is a fall in the value of gold and a rise in the value of the dollar, and it is possible that this trend is estimated to continue. However, the question arises as to who made that decision.

Was it done by the Investment Committee or the Management Board and was the BiH Presidency informed about it? The Central Bank did not answer these questions. It should be noted that the Administrative Council of the Central Bank has never been confirmed by the still current Presidency of BiH, and the law on the Central Bank does not have a technical mandate.

“The strategic determination, based on the estimated level of market risk that the central bank, which functions under the arrangement of the currency board, can take on and the fact that gold has extremely high volatility, is that the participation of monetary gold in the total portfolio of foreign exchange reserves ranges from about 1% to 2% “, they point out from the Central Bank.

Namely, the foreign exchange reserves of the Central Bank of our country amount to 15.95 billion BAM, and these are data from the spring of this year. According to the current market value, the Central Bank could get 66.5 million dollars for the sale of more than a ton of gold.

One of the key questions that arises is whether the goal of this sale was to cover (conceal) the loss in business, given that the bank’s profit in the last six months is only about two million BAM, Klix.ba reports.

E.Dz.