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FX Reserves and IFEM Movements in December

Based on preliminary data, gross NBS FX reserves amounted to EUR 11,261.8 mn at end-December, covering 168% of money supply (M1) or more than five months’ worth of the country’s imports of goods and services (almost twice the level prescribed by the standard on the adequate level of coverage of the imports of goods and services by FX reserves). 

Net FX reserves (FX reserves less banks’ FX balances on account of required reserves and other requirements) equalled EUR 8,854 mn, which is their highest year-end level since these data are monitored (since 2000).

FX reserves declined in December by EUR 364.7 mn in gross and by EUR 867 mn in net terms, driven mainly by the significant reduction of government FX liabilities in both domestic and international market (EUR 1,016.9 mn in total) that reflected good fiscal performance in 2018. The outflows pertained to the settlement of liabilities under FX securities in the domestic market (EUR 73.7 mn), net repayment of FX loans (EUR 37.4 mn), and the maturing of the dollar-denominated Serbia 2018 Eurobond (EUR 905.8 mn). The repayment of the Eurobond was announced earlier and the bulk of the funding for this purpose came from dinar sources, which contributed to the reduction of public debt and improvement of its currency structure.

Other outflows are attributable to the usual bank activities with regard to FX required reserves and other grounds (EUR 48.4 mn, net).

The said outflows from FX reserves were to a considerable degree covered by the inflows stemming from the positive effects of market factors and efficient FX reserves management, as well as from grants and other sources.

December trading volumes in the IFEM amounted to EUR 674.7 mn, up by EUR 130.9 mn from the month before. Overall in 2018, interbank trading volumes reached EUR 6,956.3 mn.

In nominal terms, the dinar gained 0.1% vis-à-vis the euro in December, whereas in 2018 as a whole it gained 0.2%. As December first saw depreciation and then appreciation pressures, the NBS intervened in the IFEM on both sides with the same amount (buying and selling EUR 30 mn) in order to ease excessive short-term volatility of the exchange rate. In the course of 2018 the NSB intervened by buying EUR 1,580 mn net (buying EUR 1,835 mn and selling EUR 255 mn).

Governor’s Office