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Serbia: Maintaining monetary stability

The National Bank of Serbia (NBS) will do everything it can to maintain monetary stability and the foreseen inflation rate after adopting the budget.

„A restrictive budget is needed for a low inflation rate, but according to our preliminary statistics, the proposed budget would mean a deficit of about two percent for gross public products, which is more than we planned,” said National Bank of Serbia Governor Radovan Jelašić. He said that no one in the Government is ready to decrease the proposed expenses in the budget, even if everyone agreed that the wages that are financed by the budget were increased „too much and too quickly.” He said that the NBS is maintaining its restrictive monetary politics, and if an increase in inflation occurs, the bank will stop the trend of decreasing referential interest rates, which are now at 9.5%, which means that interest rates could be increased.

Jelašić said that there are still no new discussions with the International Monetary Fund (IMF), and that the proposed budget for 2007 „will not open Serbia's doors towards that international institution.” He said that it would be good for the country to form a new arrangement with the IMF, because it would increase Serbia's credibility and speed up reforms, which has been proven by the recently finished arrangements. (