SNS, govt. disagree on NBS policy

Holy guacamole, we actually have something like constructive criticism of government / NBS policy and something like an alternative proposed from an opposition party. Excuse me while I pinch myself as this is rarer than diamonds.

Still, I'd like to see the SNS explain in more detail what they want. If I'm reading between the lines properly it seems they are suggesting that the base rate of 17.75% should be reduced and in turn the value of the dinar should be allowed to fall.

If that is their stance then I agree with them.

But they should also bear in mind that the NBS has some operational independence and is not there just to obey whatever the government says.

Of course there is a danger of a run on the dinar.

But if the stated aim of the NBS is to control fluctuations of the dinar, they need to be careful when increasing the value of the dinar as well. When the dinar was losing value NBS were intervening spending tens of millions of euros defending the currency. Yet when the dinar gained about 3 percent value (a huge rise in one day) they spent only 6 million euros to reduce the value of the dinar. They must be more consistent.

Plus using the base rate alone is not an effective tool to keep the value of a currency high. Serbia has the second highest interest rates in Europe and it is hurting small and medium sized businesses. We are yet to see the consequences of this, but it has started, some firms have their accounts blocked (confidential information) whilst others are slowly reducing their workforce.
Fiscal policy should also be used and there are non monetarist policies that can be employed to encourage people to use dinars, or at least not rush to the exchange office the moment they have their pay cheque.

What has to be remembered here is what we have in Serbia at the moment is more or less the opposite of what is going on in the world.

In the end NBS / government says that a rate of about 85 is the one they are aiming for. I believe a rate of about 100 should be the aim. Besides, its quite absurd that the Euro is stronger than any currency in the world at the moment - except the dinar which is rising against it in value. Absurd.

@Mr.bganon
In this enviroment i suspect that if a currency has no protection..it will fall..fall..fall
See Ukraine as an example ..so the policy of Serbia central banker must be very carefoul..

Holy guacamole, we actually have something like constructive criticism of government / NBS policy and something like an alternative proposed from an opposition party. Excuse me while I pinch myself as this is rarer than diamonds.

Still, I'd like to see the SNS explain in more detail what they want. If I'm reading between the lines properly it seems they are suggesting that the base rate of 17.75% should be reduced and in turn the value of the dinar should be allowed to fall.

If that is their stance then I agree with them.

But they should also bear in mind that the NBS has some operational independence and is not there just to obey whatever the government says.

@Mr.bganon
In this enviroment i suspect that if a currency has no protection..it will fall..fall..fall
See Ukraine as an example ..so the policy of Serbia central banker must be very carefoul..

Of course there is a danger of a run on the dinar.

But if the stated aim of the NBS is to control fluctuations of the dinar, they need to be careful when increasing the value of the dinar as well. When the dinar was losing value NBS were intervening spending tens of millions of euros defending the currency. Yet when the dinar gained about 3 percent value (a huge rise in one day) they spent only 6 million euros to reduce the value of the dinar. They must be more consistent.

Plus using the base rate alone is not an effective tool to keep the value of a currency high. Serbia has the second highest interest rates in Europe and it is hurting small and medium sized businesses. We are yet to see the consequences of this, but it has started, some firms have their accounts blocked (confidential information) whilst others are slowly reducing their workforce.
Fiscal policy should also be used and there are non monetarist policies that can be employed to encourage people to use dinars, or at least not rush to the exchange office the moment they have their pay cheque.

What has to be remembered here is what we have in Serbia at the moment is more or less the opposite of what is going on in the world.

In the end NBS / government says that a rate of about 85 is the one they are aiming for. I believe a rate of about 100 should be the aim. Besides, its quite absurd that the Euro is stronger than any currency in the world at the moment - except the dinar which is rising against it in value. Absurd.