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Serbia Dinar At Record Low Despite Intervention
Belgrade | 27 January 2009 | The Serbian dinar continued to mark a record slide in value to 95.65 dinars to the euro despite interventions by Serbia’s central bank to try to stabilise it.
The central bank has sold a total of € 254 million since the beginning of the year to try and keep the dinar from falling any further.
Economic analyst Nikola Fabris told local media B92 that in order to understand why the dinar is having such a hard time recovering, activity must be traced back to several years ago when the currency was relatively stable.
“In the period from September 2005 to September 2008, the total increase of retail prices was about 30 percent, while in these three years, the dinar’s value against the euro increased by about 10 percent,” Fabris said.
He added that since there was no strong industry backing such trends, this fall in the dinar was inevitable.
Fabris said that the world financial crisis was also to blame, mostly due to banks asking for loans to be returned immediately or in a shorter period of time than earlier.
“That is why importers are asking for foreign currency and banks are slowing getting out of securities in dinars because the value will continue to slide,” he said.
Serbian Finance Minister Diana Dragutinovic told local media that the current value of the dinar is a reflection of market conditions, adding that if the slide continues, the government should consider asking for money from the International Monetary Fund, according to the stand-by agreement the financial institution approved for Serbia this month.
Fabris said that the National Bank of Serbia must change its current policy to shift the focus from stemming inflation and take measures that would increase the credibility of the system.
(Reporting by David-Lazar Galic) Source: Balkaninsight
