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Monetarna politika | Strategija i ciljevi monetarne politike

Monetary Policy Objectives for 2001

The basic economic policy task in 2001 is the implementation of structural reforms in the field of economic, banking and fiscal sectors, i.e., the structural adjustment of the economy to a market economy. To this aim, steps will be taken to increase the country’s foreign exchange reserves, decelerate inflation, maintain stability of the national currency and stop financing budgetary and quasi-budgetary fiscal deficits from reserve money issue. If macroeconomic stabilization and structural reforms are successfully implemented, this could have a favourable effect on economic recovery and revival of exports.

Proceeding from these objectives and in line with its main functions, the NBY set deceleration of inflation and maintaining of stability of the national currency as the primary goals of monetary policy in Yugoslavia for 2001. Deceleration of inflation implies a reduction of the rate of price inflation to the monthly level of 1% by the end of the year and its longer-term stabilization at this level. Apart from the current growth of prices in line with the economic policy objectives, it is estimated that a certain rise in prices due to the price liberalization or elimination of the inherited price disparities should be necessarily accepted in 2001. But the overall elimination of price disparities in 2001 must not be carried out, as it would substantially increase the cost of living of households, which is already very high. Therefore, the elimination of price disparities should be carried out in stages, during a medium-term period of two or three years. It is estimated that a liberalization-induced rise in retail prices of about 15% would be acceptable, and that a current rise in prices (core inflation) could be roughly 15%, so that the overall rate of price inflation, on a December-to-December basis, would approximate 30%.

The maintaining of stability of the national currency within the managed floating of exchange rate implies the maintenance of the dinar rate of exchange at the level enabling an efficient adjustment of supply and demand on the foreign exchange market, without a more serious threat to the level of external reserves and competitiveness of the economy. In fact, the purpose of the managed floating of the dinar rate of exchange is to gain primarily the recognition of the impact of the demand and supply of foreign exchange on setting the value of the national currency, elimination of the unofficial foreign exchange market, and revitalization of the principle of a uniform rate of exchange. By means of its interventions, the NBY will try to maintain an orderly foreign exchange market as well as to adjust its monetary policy to the needs for maintaining stability of that market. In the shorter run, the dinar rate of exchange may fluctuate both upward and downward and a substantial appreciation or depreciation of the dinar cannot be excluded but, in the longer run, its stability must be ensured by adjustment of monetary and fiscal policies.

For the purpose of attaining the above mentioned goals, monetary policy must be sufficiently restrictive but at the same time also stimulative, so as to ensure a certain lending activity of banks on a sound bases. Such lending activity would have to support production programmes, primarily the export-oriented ones, which would give positive effects in a relatively short run. Otherwise, a further drop in output, which already is at a very low level, could more seriously jeopardize the continuation of already undertaken overall economic reforms.

The main premise for achieving of monetary policy goals is having the banking sector qualified for dealing effectively with the market-conditioned business operations. It is for this reason that the programme for restructuring and financial rehabilitation of banks should be adopted relatively soon. It is expected that this programme could be adopted by the end of the first quarter of 2001 as its preparation has been seriously undertaken. Besides, in order to enable an efficient functioning of the banking system and to provide a stimulus to investment, it is necessary to speed up the negotiations for the rescheduling our external debt.