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Serbia: FX Reserves Shrink

Published: October 11, 2013; 20:08 · (Vindobona)

NBS FX reserves amounted to EUR 10,444.5 million at end-September, covering M1 by 333 percent and more than seven months of imports of goods and services. Inflation remains stable.

Serbia: FX Reserves Shrink / Picture: © Flickr

The largest inflow to FX reserves during the month originated from the drawdown of an EIB loan (EUR 54.7 million). Other inflows came from the sale of euro-denominated RS securities in the domestic financial market (EUR 37.2 million) and bank allocations under FX reserve requirements (EUR 26.5 million, net).

The largest outflow from FX reserves was due to the settlement of liabilities to foreign creditors (EUR 151.6 million). Other outflows were registered on account of repayment of debt to the IMF (EUR 52.0 million) and payment of maturing euro-denominated RS securities (EUR 42.2 million).

Net FX reserves, defined as FX reserves less banks’ required reserves and drawings from the IMF, came at EUR 6,779.0 million.

Trading volume in the IFEM reached EUR 687 million, up by EUR 71.9 million on the month before. In the year to September, trading volumes in the IFEM amounted to EUR 7,243.9 million.

The dinar depreciated against the euro in September by 0.2% in nominal terms and the NBS sold EUR 90 million in the IFEM in order to ease excessive daily volatility of the exchange rate.

According to the Serbian Statistical Office, consumer prices remained unchanged in September, while y-o-y inflation stood at 4.9%. This means that inflation has returned within the target tolerance band, in accordance with NBS projections and expectations stated over the past year.

The key boost to the return of inflation within the target tolerance band came from monetary policy measures, the drop in the prices of primary agricultural products, low aggregate demand and relative stability of the dinar exchange rate. We expect that these factors will continue to alleviate inflationary pressures over the foreseeable period and thus help maintain inflation within the target band.