Domestic currency overvalued, says expert
As the central bank chief announces the exchange rate stability, some experts doubt whether the value of the dinar is realistic.
Tuesday, 04.11.2008.
13:27
As the central bank chief announces the exchange rate stability, some experts doubt whether the value of the dinar is realistic. Yesterday, the National Bank of Serbia (NBS) decision to increase its reference interest rate by two percentage points to 17.75 came into force. Domestic currency overvalued, says expert B92 learned that the central bank is not ruling out further hikes of this key policy rate, depending on the fiscal policy and "outside conditions". Governor Radovan Jelasic spoke for B92 on Monday to explain that the increase of the interest rate – which went up seven percentage points since the start of the year – will have a positive influence on the struggling dinar, and on prices. Jelasic also said that "if he were given a free hand" at putting together the 2009 budget, salaries and pensions would be frozen, in order to curb public spending and control the inflation. The NBS chief also voiced confidence that the latest measures will see the national currency strengthen against the euro. But some experts, such as Director of the Institute for Market Research Miloje Kanjevac, question the wisdom of continued NBS interventions in the hard currency market. Instead of selling more than EUR 200mn in the past couple of months to halt the dinar's decline, the domestic currency should have been allowed to reach its realistic value, Kanjevac explained. "That intervention did damage, because the home currency's overvaluing continued," he said in Belgrade yesterday, presenting a quarterly bulletin on Serbia's economic trends. According to Kanjevac, a reasonable exchange rate should be around RSD 150 for one euro – almost double the current figures. "No country in the world is driving the currency above its real value, something Serbia is doing," he warned. Kanjevac believes that the NBS should refrain from further intervention, and that the exchange rate should gradually reach its realistic level.
Domestic currency overvalued, says expert
B92 learned that the central bank is not ruling out further hikes of this key policy rate, depending on the fiscal policy and "outside conditions".Governor Radovan Jelašić spoke for B92 on Monday to explain that the increase of the interest rate – which went up seven percentage points since the start of the year – will have a positive influence on the struggling dinar, and on prices.
Jelašić also said that "if he were given a free hand" at putting together the 2009 budget, salaries and pensions would be frozen, in order to curb public spending and control the inflation.
The NBS chief also voiced confidence that the latest measures will see the national currency strengthen against the euro.
But some experts, such as Director of the Institute for Market Research Miloje Kanjevac, question the wisdom of continued NBS interventions in the hard currency market.
Instead of selling more than EUR 200mn in the past couple of months to halt the dinar's decline, the domestic currency should have been allowed to reach its realistic value, Kanjevac explained.
"That intervention did damage, because the home currency's overvaluing continued," he said in Belgrade yesterday, presenting a quarterly bulletin on Serbia's economic trends.
According to Kanjevac, a reasonable exchange rate should be around RSD 150 for one euro – almost double the current figures.
"No country in the world is driving the currency above its real value, something Serbia is doing," he warned.
Kanjevac believes that the NBS should refrain from further intervention, and that the exchange rate should gradually reach its realistic level.
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