Since 2016, Serbia has bought more foreign currency than it sold, for 4.5 billion euros.
Monetary policy makers point out that this is the result of higher supply than demand.
Why has the strong dinar also become attractive to foreign buyers of securities?
Although the pandemics slowed down economic activity, the National Bank has bought more foreign currency than it has sold since the beginning of the year – the difference is 900 million euros.
The dinar has withstood the crisis, so long-term dinar securities are included in the renowned JP Morgan index. The Central Bank of Singapore also bought our securities, RTS reported.
“Thanks to the expansion of the base of investors who invest in dinar bonds, the yields on the seven-year bond of the Republic of Serbia were reduced on the secondary market by 30 basis points in July. The strong dinar is the result of better work of domestic companies. Exports, investments and foreign exchange inflows from tourism are growing. So, the supply is growing, but the demand is also growing. Of course, the import is growing. The supply is growing faster. That means that the export and the inflow of direct foreign investments are growing,” points out Nikola Dragasevic, director of the department at the NBS.
Some economists believe that the strengthening of the dinar against the euro is not sustainable if it is not accompanied by productivity growth. However, the analyzes say that our model of inflation targeting and the fluctuating exchange rate is part of a specific solution, taken from the successful model of the Czech Republic.
“If you strengthen the macroeconomic environment, there is no strengthening of economic stability, and no strengthening of the domestic currency for the dinar, two, three has no effect on exports or imports. First of all, you must focus on those structural policies,” said Milan Trajkovic, director of the NBS.
Serbia annually has a foreign trade surplus of around one billion euros, thanks to increased exports and investment attraction. The foreign exchange reserves, which currently amount to 14.6 billion euros, have also increased that much, of which 12 percent is in gold, B92 reports.
