Currency decline “result of supply and demand”

President of the NBS Council Dejan Soskic says a reasons for the dinar sliding to over 100 for one euro are the ratio between supply and demand. Another, the candidate for the next central bank governor added, is the fact that Serbia has no competitive export-oriented economy and is not attractive enough for direct foreign investments. Currency decline “result of supply and demand” Soskic believes that there is a possibility that the supply of dinar and demand for euro in the domestic market is partly caused by the expectation that the crisis epicenter in the eurozone will have negative effects on its immediate surroundings. In an interview published by the Belgrade-based daily Vecernje Novosti, Soskic assessed that a more "aggressive" defense of the exchange rate involving interventions from foreign currency reserves would give short-term results, and would also be expensive for the country and lead to its additional indebtedness. "A more aggressive defense of the exchange rate would possibly make sense if it would remove the short-term and significant imbalance in the foreign exchange market, caused by speculative or psychological reasons. I believe that, so far, the movements on the foreign currency market have been neither unexpected nor alarming," he underscored. Soskic pointed out that the banks should not be expected to be additionally indebted abroad, adding that Serbia's indebtedness is growing rapidly and that the public debt level should not increase any more. He also told the newspaper that he agreed with Prime Minister Mirko Cvetkovic who said recently the exchange rate was not the problem, but rather the euroisation and the “hidden two-currency system”. Soskic expects the current talks with IMF officials concerning the ongoing stand-by arrangement worth a total of EUR 2.9bn to be successful, and says that if Serbia were to increase public sector salaries and pensions, the country would “likely lack money for planned public investments in infrastructure”.

Currency decline “result of supply and demand”

Šoškić believes that there is a possibility that the supply of dinar and demand for euro in the domestic market is partly caused by the expectation that the crisis epicenter in the eurozone will have negative effects on its immediate surroundings.

In an interview published by the Belgrade-based daily Vecernje Novosti, Šoškić assessed that a more "aggressive" defense of the exchange rate involving interventions from foreign currency reserves would give short-term results, and would also be expensive for the country and lead to its additional indebtedness.

"A more aggressive defense of the exchange rate would possibly make sense if it would remove the short-term and significant imbalance in the foreign exchange market, caused by speculative or psychological reasons. I believe that, so far, the movements on the foreign currency market have been neither unexpected nor alarming," he underscored.

Šoškić pointed out that the banks should not be expected to be additionally indebted abroad, adding that Serbia's indebtedness is growing rapidly and that the public debt level should not increase any more.

He also told the newspaper that he agreed with Prime Minister Mirko Cvetković who said recently the exchange rate was not the problem, but rather the euroisation and the “hidden two-currency system”.

Šoškić expects the current talks with IMF officials concerning the ongoing stand-by arrangement worth a total of EUR 2.9bn to be successful, and says that if Serbia were to increase public sector salaries and pensions, the country would “likely lack money for planned public investments in infrastructure”.