Soskic Says Serbian Dinar Has ‘Quickly Got Back to Normal’
Serbia’s “dinarization strategy” will help limit financial-market risks and avoid the implementation of a tax on banks to finance funds in case of instability, Governor Dejan Soskic said.
New rules doubling the downpayment needed for foreign exchange-indexed loans and favoring dinar-denominated lending for long-term financing of housing credits, took effect today to decrease the possibility of turmoil in a county where more than two-thirds of transactions are made in foreign currency, he told reporters in Belgrade.
“The foreign-exchange link generates systemic risks and this decision is part of so-called macro-prudential measures,” Soskic said. “An alternative” to those measures would be to establish special funds that would be used in case of financial instability and would be financed from an “additional tax on banks, which is a solution we don’t favor.”
The Belgrade-based Narodna Banka Srbije wants to boost the use of the dinar and make sure that people earning dinars don’t borrow in other currencies. The dinar lost around 40 percent of its value between late 2008 and 2010 as investors fled emerging markets at the height of the global financial turmoil.
Dinar Moves
After months of strengthening against the euro since the start of the year, the dinar wiped out most of its gains in the second half of June following the government’s decision to no longer index-link its future market borrowing to the European currency. The dinar traded at 100.51 per euro at 2:12 p.m. in Belgrade, up 0.3 percent on the session.
Even though the currency gained more than 2 percent in as many days, the bank hasn’t needed act on the foreign-exchange market and Soskic said that it wasn’t in the central bank’s interest to have “continuous interventions.”
The dinar’s moves in recent days were because of maturing government euro-indexed debt and the currency has “quickly got back to normal,” Soskic said.
Rather than the relying on the dinar, exporters should get access to cheaper bank loans, Soskic said.
Deputy Prime Minister Bozidar Djelic said this week that the government is trying to persuade commercial banks to disburse the first tranche of a 250 million-euro ($362 million) loan from the European Investment Bank to limit interest rates paid by export-oriented companies to 4 percent.
To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net
To contact the editor responsible for this story: Andrea Dudikova at adudikova@bloomberg.net
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