Why the increase in debt obligations have no positive effects on the performance

Abstract

The global trend of alarming growth of indebtedness at the end of last and the beginning of this century has started serious debates on the doctrinal and management aspects of this phenomenon with a view of formulating effective management strategies of debt and generated crisis of the financial and real sectors. Indebtedness of Bosnia and Herzegovina is primarily manifested as indebtedness of its entities, the Republic of Srpska and the Federation, because the debts are allocated. As the level of debt significantly affects the interest rates it is symptomatic why the price of capital (interest) is high when Bosnia and Herzegovina and the entities do not belong to the heavily indebted countries. We hope that this paper will provide at least part of the answers to neutralize addressed causes of the recession and generated consequences!? On the other hand, the problems generated by the recession are difficult to solve in the current institutional setting (OHR, the currency board), which obviously does not have the capacity to creatively manage changes, but, apparently, there is no interest either (!?) of the key political factors to change anything in the existing mechanism, so discord of powers and responsibility continually generates not only political misunderstandings, but also negative implications on the economic situation and the interests of Bosnia and Herzegovina and the Republic of Srpska!? The changes of such circumstances require political will and consensus that own problems must be primarily addressed by own forces, for which political factors do not show any initial readiness!? Is there in actual moment of academic, political and social consensus to move this way !? We will see!?!.

Keywords

• debt
• interest rate
• the risk premium
• competitiveness
• national economy
• gdp
• export