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The Government of the Republic of Serbia

In the service of citizens

Serbia's central bank introduces counter-inflation measures

Belgrade, 8 May 2006

Governor of the National Bank of Serbia (NBS) Radovan Jelasic stated that the NBS has decided to introduce new measures for reducing inflationary pressure and that they will become effective on May 10.

Radovan Jelasic at today's press conference

Author: Fonet

Jelasic explained at a press conference that new measures entail increasing statutory reserves for external borrowing and foreign currency deposits for up to two years from 40% to 60%, as well as limiting loans to physical persons up to the level of 200% of the original capital.

He also announced introducing the obligation of securing additional capital of 25% for the approved loans which exceed 10 million dinars with the foreign currency clause.

According to Jelasic, there are many reasons for introducing the measure of increasing the statutory reserves for external borrowing from 40% to 60%, but one of the most important is that the short-term external borrowing of banks currently stands at €946 million and has almost redoubled over the past 12 months.

Limiting the approval of loans to physical persons has been caused by a continuing rise in the number of approved loans and a high level of correlation between consumer loans and imports. However, the loans secured by state guarantees (agriculture, housing construction) will be exempted from this measure, Jelasic said.

Serbian Minister of Finance Mladjan Dinkic said today that the Ministry of Finance supports the decision of the NBS to increase the rate of banks' statutory reserves for short-term loans and foreign currency deposits with the aim of reducing inflation pressure.

Dinkic said that he finds that the measures of the NBS are necessary because in this quarter external borrowing of banks and the economy has increased. Such a measure of the central bank is necessary at this moment and refers only to increasing the rate of statutory reserves for short-term external borrowing, which means that long-term housing and investment loans to the economy will remain with the current rate of statutory reserves, Dinkic explained.