The article discusses the efforts to undertake economic reconstruction in Bosnia following the end of the war. It argues that, despite certain successes such as the rehabilitation of infrastructure and the privatization of the banking sector, overall progress has been below expectations. The study, accordingly, attempts to analyse the reasons behind the reconstruction failure by grouping Bosnia’s problems into four different challenges for analytical purposes: the post-Dayton institutional deficiency; overcoming political fragmentation; creating appropriate conditions for economic revival; and graduating from dependency on foreign economic aid. In this respect, it is concluded that the intersection between the economic and political dimensions of post-conflict reconstruction has generated a paradox: while huge amounts of economic assistance have intended to facilitate political reconciliation, the nature of the administrative (political) structure that was established in the post-war period has in turn hindered economic recovery and the creation of a unified economic space. Moreover, political fragmentation and slow progress in economic reconstruction have been in a mutually constitutive relationship in which the existence of the one has contributed to the sustenance of the other.