Due to the energy crisis, higher foreign exchange sales, News
During 2021, the National Bank increased its reserves by three billion euros, and part of it was used so that the dinar would not weaken in the short term.
Despite turbulent events in the world economy, the dinar exchange rate against the euro remained stable, and the National Bank of Serbia (NBS) intervened in the market in both directions as needed. Both by selling and buying foreign exchange. The central bank states that the shocks from the external environment in the form of the energy crisis, and the consequent rise in prices, which have been felt all over the world since October, have been ready. With increased foreign exchange reserves, one part of which was used to mitigate excessive short-term oscillations in the direction of weakening the domestic currency.
“In the fourth quarter of 2021, due to increased demand for foreign exchange of domestic energy importers, but also legal entities in majority foreign ownership, which paid part of the profits to their parent companies, the NBS sold 455 million euros net in foreign exchange activities,” they answer our question. on the reasons for exchange rate stability.
Unlike the last quarter of last year, in the period before that, the circumstances influenced the strengthening of the domestic currency.
“Therefore, the NBS bought 645 million euros net in the foreign exchange market in 2021, primarily due to renewed structural pressures to strengthen the currency, which were influenced by factors that created such pressures in the period before the pandemic.” The common denominator of these factors is the improvement of our country’s macroeconomic results, the fact that we have recovered economic activity in Serbia from the crisis faster than expected and many other economies and, accordingly, a record high inflow of foreign direct investment in 2021. influenced the increased supply of foreign exchange in relation to the demand for them “, according to the NBS.
They explain that the effect of the mentioned factors and the pressures towards the strengthening of the dinar were especially pronounced in the first three quarters of 2021. Maintaining the relative stability of the dinar against the euro, the NBS bought 1.1 billion euros net in the foreign exchange market in this period, thus further increasing foreign exchange reserves, and thus the country’s resistance to possible shocks, primarily from the external environment.
“In that way, we were more than ready for the increased demand for foreign exchange, which was realized in the last quarter of 2021,” the NBS notes.
The gross foreign exchange reserves of the NBS at the end of December amounted to 16.5 billion euros, which is almost the same level as at the end of the previous month (1.4 million euros more than in November). During 2021, foreign exchange reserves increased by three billion euros, which further strengthened the resilience of the domestic financial system to earthquakes from the international environment.
Foreign exchange reserves at this level provide coverage of the money supply M-1 of 137.8 percent and more than six months of imports of goods and services, which is twice the standard for determining the adequate level of coverage of imports of goods and services by foreign exchange reserves.
At the end of December, net foreign exchange reserves (foreign exchange reserves less banks’ foreign exchange assets on the basis of required reserves and other bases) amounted to EUR 13.7 billion and were EUR 2.6 billion more than at the end of the previous year. are for 231.5 million euros).
The NBS will continue to closely monitor developments in the foreign exchange market in the coming period, and to react, if necessary, by buying or selling foreign exchange, bearing in mind the importance of relative stability of the dinar exchange rate against the euro for overall financial and macroeconomic stability.