NBS chief: IMF deal would guarantee stability of currency

NBS Governor Dejan Soskic says the lack of an arrangement with the International Monetary Fund (IMF) would additionally contribute to the drop of the dinar. It would also jeopardize the confidence of international investors and also increase the price of funding Serbia's public debt, the central bank chief told Tanjug news agency in an interview. NBS chief: IMF deal would guarantee stability of currency This would increase the depreciation pressures on the dinar rate, jeopardize the trust of international investors as regards Serbia's ability to meet its short- and mid-term obligations and it would also have a direct effect on the increase of price of covering the country's public debt, Soskic underscored. We need to show considerable responsibility because what we are dealing with here is the level of budget funds for covering the public debt, he stated. We also need to be aware that any drop of the dinar rate has a new effect on the growth of the public debt against the GDP because the public debt is mostly expressed in foreign currency while GDP is dinar-based, he added. Soskic underscored that prompt constitution of the government is a necessary condition for Serbia to restore trust on the international financial market and it is very important to know the government would adopt a set of measures of the essential fiscal consolidation which the parliament could pass as new laws. The total price of funding the current instability, which I hope is short-term, depends on this point, he said. We must never lose sight of the fact that the sooner the government is constituted and the sooner the country returns to the path of fiscal consolidation, the measures which need to be carried out would be milder, he said. He noted that NBS expects increase in government-regulated prices in the second half of the year, but it also believes that it is possible for the inflation rate to remain within the limits of the target inflation. In case the limits of the target inflation are exceeded at any point, NBS believes this would be only a short-term effect if the future government maintains a responsible fiscal policy in the forthcoming period, the governor stated. Soskic recalled that the target inflation for 2012 totals 4 percent, plus or minus 1.5 percent, and underscored that he does not expect to see a long-term drop or increase of the target inflation. One of the measures recently discussed in public, the correction of value-added tax can have a direct effect on the stability of prices but any changes would come as one-time shocks to which the monetary policy, by definition, should not react, Soskic stated. Dejan Soskic (Tanjug) Tanjug

NBS chief: IMF deal would guarantee stability of currency

This would increase the depreciation pressures on the dinar rate, jeopardize the trust of international investors as regards Serbia's ability to meet its short- and mid-term obligations and it would also have a direct effect on the increase of price of covering the country's public debt, Šoškić underscored.

We need to show considerable responsibility because what we are dealing with here is the level of budget funds for covering the public debt, he stated.

We also need to be aware that any drop of the dinar rate has a new effect on the growth of the public debt against the GDP because the public debt is mostly expressed in foreign currency while GDP is dinar-based, he added.

Šoškić underscored that prompt constitution of the government is a necessary condition for Serbia to restore trust on the international financial market and it is very important to know the government would adopt a set of measures of the essential fiscal consolidation which the parliament could pass as new laws.

The total price of funding the current instability, which I hope is short-term, depends on this point, he said.

We must never lose sight of the fact that the sooner the government is constituted and the sooner the country returns to the path of fiscal consolidation, the measures which need to be carried out would be milder, he said.

He noted that NBS expects increase in government-regulated prices in the second half of the year, but it also believes that it is possible for the inflation rate to remain within the limits of the target inflation.

In case the limits of the target inflation are exceeded at any point, NBS believes this would be only a short-term effect if the future government maintains a responsible fiscal policy in the forthcoming period, the governor stated.

Šoškić recalled that the target inflation for 2012 totals 4 percent, plus or minus 1.5 percent, and underscored that he does not expect to see a long-term drop or increase of the target inflation.

One of the measures recently discussed in public, the correction of value-added tax can have a direct effect on the stability of prices but any changes would come as one-time shocks to which the monetary policy, by definition, should not react, Šoškić stated.