Historical Sketch

The 1878 Berlin Treaty after the Russian-Turkish War allowed the Austro-Hungarian occupation and military administration of Bosnia-Herzegovina which nominally remained under Ottoman suzerainty that had lasted since the mid-15th century. In 1908 finally, Austria-Hungary fully annexed the the territory. After World War I and the fall of the Habsburg monarchy, it joined the newly founded Yugoslavia in 1918. During the second World War, when Yugoslavia had been dismantled by the German occupants, it was part of the Croatian state. In re-constituted Yugoslavia of 1945, Bosnia-Herzegovina became one of the constituent republics. With the outbreak of the Yugoslav civil war, Bosnia-Herzegovina declared autonomy in 1991 and, following a referendum, also independence a year later. This triggered a civil war between the three ethnic groups that ended in a factual of the country. The Dayton peace agreement of 1995 created Bosnia and Herzegovina as a federal state under the supervision of the Office of the High Representative (of the signatory powers), consisting of the Federation of Bosnia and Herzegovina and the Serbian Republic ("Republika Srpska").

Monetary History Overview

Four months after the declaration of independence, the 1st Bosnian-Herzegovinian Dinar was created as interim currency to separate from the Yugoslav currency area but remained tied to it for the time being. In April 1993, Serbia floated the Yugoslav currency which plunged into hyperinflation. Bosnia-Herzegovina devalued at the same time but pegged the Dinar to the German Mark to decouple from the monetary development in Serbia. In June, the peg was adjusted by more than 95% so that for a short time the Bosnian-Herzegovinian and Yugoslav currencies were close to parity. In August 1994 a redenomination took place, and four zeros were cut creating the 2nd Bosnian-Herzegovinian (New) Dinar as the new currency unit, still considered interim as it did not circulate in the entire country. At the transition, the peg to the German Mark was reduced by another 35% but remained in place and stabilized the Bosnian-Herzegovinian currency. The two Bosnian-Herzegovinian Dinar currencies were introduced only in the territory under control of the central (Muslim dominated) government. The Croat-dominated territory was using the currency of neighbouring Croatia. The Serbian Republic had stayed in the Yugoslav currency area together with neighbouring Serbia. Between 1992 and 1994, when both the war and the Yugoslav hyperinflation were raging, the banknote supply from Serbia could not be maintained. As a consequence, the Banja Luka branch of the Yugoslav National Bank began issuing paper money for local use, denominated in the 7th (of July 1992) and 8th Yugoslav Dinar (of October 1993). The short-lived 9th Yugoslav Dinar was skipped, and for the 10th Yugoslav Dinar the normal banknotes used in Serbia could be supplied again. In October 1997 finally, Bosnia-Herzegovina unified its currency. The Bosnian-Herzegovinian (Convertible) Mark became the new national currency. In all parts of the country, the previous currencies were withdrawn, and for the first time, the money was the same everywhere. Or almost, as two series of banknotes were issued by the Central Bank, one for use in the Muslim-Croat Federation, the other for use in the Serbian Republic. The Mark continued the peg the German Mark of August 1994 without any further adjustment and maintained the same ratio after the introduction of the Euro in 1999.

Bosnia-Herzegovina joined the International Monetary Fund (IMF) on 14.12.1992.

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