Government launches liquidity loans

Government launches liquidity loans At the same time, the state expects banks to increase funds for this program by RSD 40bn. The Serbian dinar (RSD) indexed loans will now come with an interest rate of 10.5 percent. Ministry of Economy State Secretary Nebojsa Ciric spoke to B92 about the details of the program, which comes as part of the new government measures aimed at alleviating the effects of the crisis. B92: We know that the liquidity loans have so far been most sought after, but we also know that an increasing number of companies in Serbia is facing insolvency, the figure mentioned now is 67,000. How realistic is it to expect that these loans will jump-start Serbia's economy? Ciric: The subsidized liquidity loans program is in exceptional demand. So far over EUR 300mn have been placed through banks and as much is being processed by commercial banks. What is important to point out to is the interest rate of three percent, which means that it went down 2.5 percent on the annual level. Another new feature is the introduction of the dinar-indexed loans with an interest rate of 10.5 percent. The fact is that the liquidity has improved internally in our economy. It's true there are 60,000 blocked accounts, 20,000 of them belonging to companies, others to independent stores. Of those 20,000, some 16,000 are companies that have been blocked for over two or three years. So that while the effect of the crisis does reflect on this data, it is quite certain that some things cannot be presented as a consequences of the crisis. B92: What is your suggestion to the companies, should they borrow in euros or go for the dinar liquidity loans, since those have also been introduced now? Ciric: Both are exceptionally favorable. Our, in a manner of speaking, mid-term strategy is for our economy to turn to borrowing in dinars. The exchange rate of the domestic currency has been stable for the past three months, without any interventions from the National Bank of Serbia. In any case, the trend is for Serbia's economy to start using the dinar-indexed loans as primary. And their price will certainly go down, since the central bank (NBS) key policy rate, which is a parameter for these loans, will also be going down in the coming period. I am convinced of that. B92: Those banks that place the money to the economy with favorable interest rates will for the first time have that sum treated as deductable from the obligatory hard currency reserve with the NBS, which in effect means that the state is showing favoritism toward some banks? Ciric: Up until now we have also had 34 banks – 30 banks in the subsidized loans program. We have made a change and now the only condition will be for the banks to essentially place the money, so that we can make those loans cheaper, down to three from 5.5 percent, which really is several times lower than any other interest rate you can find in the market. One of the principal ways to do this is to free up the obligatory hard currency reserves. In fact, we do not show favoritism to any bank, on the contrary, we are stimulating banks to place as much as possible. And the only condition for them to achieve this possibility is to be monitored on a monthly basis by the NBS, for them to have a growth in placement through the subsidized loans program. The goal is for the banks to place as much money as possible, to pump it into the economy, so that we can eliminate its internal insolvency problem. As of Monday, May 18, Serbia's economy has at its disposal new liquidity loans subsidized by the state. These loans will come with an annual interest rate of three percent. Journalist: Neda Pantelic As of Monday, May 18, Serbia's economy has at its disposal new liquidity loans subsidized by the state. At the same time, the state expects banks to increase funds for this program by RSD 40bn.

Government launches liquidity loans

At the same time, the state expects banks to increase funds for this program by RSD 40bn. The Serbian dinar (RSD) indexed loans will now come with an interest rate of 10.5 percent.

Ministry of Economy State Secretary Nebojša Ćirić spoke to B92 about the details of the program, which comes as part of the new government measures aimed at alleviating the effects of the crisis.

B92: We know that the liquidity loans have so far been most sought after, but we also know that an increasing number of companies in Serbia is facing insolvency, the figure mentioned now is 67,000. How realistic is it to expect that these loans will jump-start Serbia's economy?

Ćirić: The subsidized liquidity loans program is in exceptional demand. So far over EUR 300mn have been placed through banks and as much is being processed by commercial banks. What is important to point out to is the interest rate of three percent, which means that it went down 2.5 percent on the annual level. Another new feature is the introduction of the dinar-indexed loans with an interest rate of 10.5 percent.

The fact is that the liquidity has improved internally in our economy. It's true there are 60,000 blocked accounts, 20,000 of them belonging to companies, others to independent stores. Of those 20,000, some 16,000 are companies that have been blocked for over two or three years. So that while the effect of the crisis does reflect on this data, it is quite certain that some things cannot be presented as a consequences of the crisis.

B92: What is your suggestion to the companies, should they borrow in euros or go for the dinar liquidity loans, since those have also been introduced now?

Ćirić: Both are exceptionally favorable. Our, in a manner of speaking, mid-term strategy is for our economy to turn to borrowing in dinars. The exchange rate of the domestic currency has been stable for the past three months, without any interventions from the National Bank of Serbia.

In any case, the trend is for Serbia's economy to start using the dinar-indexed loans as primary. And their price will certainly go down, since the central bank (NBS) key policy rate, which is a parameter for these loans, will also be going down in the coming period. I am convinced of that.

B92: Those banks that place the money to the economy with favorable interest rates will for the first time have that sum treated as deductable from the obligatory hard currency reserve with the NBS, which in effect means that the state is showing favoritism toward some banks?

Ćirić: Up until now we have also had 34 banks – 30 banks in the subsidized loans program. We have made a change and now the only condition will be for the banks to essentially place the money, so that we can make those loans cheaper, down to three from 5.5 percent, which really is several times lower than any other interest rate you can find in the market. One of the principal ways to do this is to free up the obligatory hard currency reserves.

In fact, we do not show favoritism to any bank, on the contrary, we are stimulating banks to place as much as possible. And the only condition for them to achieve this possibility is to be monitored on a monthly basis by the NBS, for them to have a growth in placement through the subsidized loans program.

The goal is for the banks to place as much money as possible, to pump it into the economy, so that we can eliminate its internal insolvency problem.