Bosnia and Herzegovina lies within the western Balkans in Southeast Europe bordered by Serbia, Croatia, and Montenegro and has access to the Adriatic Sea. Most parts of the country have mountainous terrains covering the central Dinaric Alps and with Maglic as its highest point at 2,386 meters.
The country joined the Kingdom of Serbs, Croats, and Slovenes, which was later on, changed to Yugoslavia. On March 1, 1992, it declared its independence from Yugoslavia. Shortly thereafter, a Serbian enclave that was backed by the Yugoslavian People’s Army and the Serbian militias seceded to form the Republika Srpska.
Bosnia and Herzegovina used the Bosnian Dinar for internal economic transactions in the Bosniak-controlled regions. The currency was introduced by the National Bank of Bosnia and Herzegovina at the start of the war in July 1992 to replace the 1990 Yugoslav Dinar issues. The first banknotes were overstamped Yugoslavian dinar bills.
When the warfare worsened, Bosnia’s economy had a drastic downturn as its output dropped by 80% and its unemployment rate went up from 1992 until 1995. The shortage of banknotes had caused isolated regions to produce emergency banknotes for their own local circulation. These paper bills were overstamped with “novcani bon” or cash coupons, designed with a dove which is the national of Bosnia. These cash coupons were replaced with the set of notes introduced by the National Bank of Bosnia and Herzegovina between 1992 and 1993.
The new family of notes carried guilloches on their obverse design while the reverse depicted either the national emblem or the Stari Most which is also known as the Mostar Bridge. In 1994, due to high inflation, the Bosnian dinar was revalued at a rate of 1 new dinar to 10,000 old dinara. Shortly after the Dayton, Ohio peace agreement was signed on December 14, 1995, the central bank began issuing banknotes not only for the Bosniak-administered states but also for the entire country including the Croat-Bosniak Federation and the Republic of Srpska.
In 1998, the convertible mark or the German mark was introduced to replace the dinar. Convertible mark banknotes focused on Yugoslav writers and poets. Later issues were printed on upgraded paper quality and equipped with enhanced security elements including Motion security thread, watermarks with electrotypes, solid windowed security thread with demetalized text, iridescent stripes, and optically variable inks. The currency was linked to the euro which gained the public’s confidence in the banking sector and the legal tender.
The country still faced a high rate of unemployment as well as a significant amount of account deficit despite the boom of its private sectors.Additionally, government spending had gone up to 50% of GDP and foreign investment declined. Because of political disagreement among parties, state enterprise privatization had slowed down.
In September 2007, Bosnia and Herzegovina joined the Central European Free Trade Agreement, giving high importance on the public administration amendments, reinforcing its fiscal system, economic progress through a more competitive and powerful private sector, and membership to the World Trade Organization.