on the rise. ecb will keep its negative rates on its deposit facility for some time and will continue with a lot of other unorthodox measures to stimulate the economy. in short, we have to face such environment for at least the medium term. v i hope this conference, with carefully chosen papers to be presented today, will help us to have better understanding of challenges in the current environment, and the nature of linkages between monetary and fiscal policy. with a narrow conventional monetary policy space and measures, growing public debt burden and narrowing fiscal space, we are all facing challenging period ahead of us. a better understanding of the sources of risks, roles, and limitations of public policies will lead to an optimal policy mix, given the circumstances. vi as the agenda is long, our day is divided into two main panels. the first part is entitled : spillovers from the ecb ’ s non - standard monetary policy measures ; who ’ s afraid of euro area monetary tightening? it will be chaired by our chief economist belma colakovic. we will listen to three papers from the ecb, croatian and bulgarian national banks. the afternoon panel : monetary and fiscal policies effectiveness in low interest rate environment will be chaired by marko skreb, from finra. cases from albania, macedonia and turkey will be presented. so during the conference we will be able to listen to experiences from a broad geographical coverage as well as diverse central banks, from small ones to ecb and turkey. hopefully this should enable us to draw some general conclusions. velimir sonje from finra again will help us to extract some takeaways with his final remarks. vii to close my remarks i would like first to express my special thanks and gratitude to all that enabled this conference to happen : cbbh staff that prepared it ( specially our chief economist ms. belma ), all the speakers and their contribution and audience for taking an interest and being open to observing these pressing macroeconomic issues through, perhaps, slightly different lenses. cbbh has been cooperating for three fruitful years with finra project financed by usaid. as managing director of bih usaid program ms. nancy eslick will speak after me, i will not use much time on this topic, but our thanks go to finra, mr. marko, david, velimir and amil, and of course usaid. i am looking forward to all the contributions and interesting discussions. thank you all once again. ms.

region. • government securities market : a draft law that will give a legal basis for this market is ready and hopefully will be introduced to parliament very soon. a lot of work has already been done on the infrastructure for this market. most of the elements already exist - registries, clearing and settlement systems - and the cbbh is getting financial and technical assistance from the us to establish a new issue facility. at a technical level i think we could be ready to issue the first short - term security as early as the first quarter of 2004 - provided the law is passed. this meeting should support the speedy introduction and passage of this law. • a leasing law has been drafted and will also hopefully be introduced to parliament soon. • one company has issued a company debenture ( i am not sure if this is the name you use in bih ) on the rs stock exchange. it is very small but it is the first example of a new capital raising instrument for enterprises in bih. reserve requirements : the final issue i want to comment on is the reserve requirements imposed by the cbbh. i am sure the banks here today will say this is one element in the high cost of capital in bih. before they do so, they should think about the following two facts : • the reserve requirement we impose, which is currently 7. 5 % and will rise to 10 % from 1 december, is much lower than in neighboring countries. i understand that the ratio is 19 % in croatia and 22 % in serbia for example. • the remuneration we pay banks on the reserve deposits at the cbbh, which is around 2 % on required reserves and 1 % on excess reserves, is quite generous compared with most other central banks in eastern europe. we are one of the few central banks to remunerate total reserve deposits. • the banks can say that these reserve requirements do impose a cost on them. my point is that the cost the cbbh imposes on you is less than the central banks in the neighboring countries impose on their banks so it is not an explanation for the cost of capital being higher in bih. conclusion : the banking system has improved significantly in bih and this has brought down the cost of capital. but there are further improvements that can be made. in particular, it is very important to accelerate the development of the capital markets in bih. the cbbh promises to continue to be actively involved in this process. but, the things that will do most to