Gross foreign exchange reserves of the National Bank of Serbia amounted to 13.46 billion euros at the end of November this year, which is about the same level as last month, the NBS said. Foreign exchange reserves at this level provide M1 cash coverage of 187 percent and six months of imports of goods and services, which is twice the standard that establishes an adequate level of coverage of imports of goods and services with foreign reserves.
According to a statement by the NBS, gross foreign exchange reserves were down slightly, by 34.3 million euros, compared to the end of October, which is entirely a result of the government’s net deleveraging of foreign currency loans (by 50.7 million euros net), thus contributes to the reduction of public debt of the Republic of Serbia.
Net foreign exchange reserves (the amount minus foreign exchange reserves of banks on reserve requirements and other bases) amounted to 11.39 billion euros at the end of November.
The central bank points out that the inflows into foreign currency reserves were realized in November – based on NBS interventions in the interbank foreign exchange market (net effect of 25 million euros), efficient management of foreign exchange reserves, donations, obligatory reserves due to usual activities of banks and other bases (net total 128.1 million euros), with a positive net market effect (27.3 million euros) – were more than sufficient to cover outflows from foreign reserves on other bases amounting to a total of 164 million euros.
Gross foreign exchange reserves increased by 2.2 billion euros from January to the end of November, which is entirely attributable to NBS activities through interventions – net purchases of foreign exchange on the domestic foreign exchange market (effect of 2.37 billion euros). It is the healthiest way to increase reserves, since it does not involve any borrowing or other liabilities.
The growth of reserves was achieved in the environment of strong deleveraging of the government in foreign currency on loans and securities in the net amount of 663 million euros. By increasing foreign exchange reserves, the NBS further strengthens the resilience of the domestic financial system to potential shocks from the international environment.
The Central Bank recalls that in November, for the second time this year, Serbia issued a euro-denominated bond (re-issue of the June Eurobond issue) in the international financial market of 550 million euros at face value, for the early redemption of a part of the dollar Eurobond in the amount of 589.7 million dollars, which was issued in 2013 at a coupon rate of 4.875 percent and is due in February 2020.
In this way, Serbia replaced the old expensive debt with significantly cheaper financing at a record low interest rate of 1.25 percent, significantly lower than the interest rate of 1.619 percent achieved when it first issued this Eurobond in June. The volume of foreign exchange trading in the interbank foreign exchange market in November amounted to 564.9 million euros and was 239.5 million euros lower than in the previous month. During the 11 months of this year, a total of 5.562 billion euros was realized in interbank trade.
