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FX Reserves and IFEM Movements in March

Gross NBS FX reserves amounted to EUR 11,440.5 mn at end-March, up by EUR 42.1 mn m-o-m and by as much as EUR 1,205.2 mn y-o-y. This level of gross FX reserves covered 184% 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 8,963 mn at end-March, up by EUR 3.0 mn m-o-m. 

Gross FX reserves expanded in March against the backdrop of significant government debt repayment (FX loans and securities), mainly as a result NBS activity in the domestic FX market – the net inflow of EUR 77.0 mn (an inflow of EUR 105.0 mn from NBS FX purchase interventions in the IFEM and an outflow of EUR 28.0 mn under additional FX swap auctions that pushed up the level of FX reserves in February).

FX reserves were also boosted by the inflows resulting from successful FX reserves management, grants, usual banks’ activity with regard to FX reserve requirements, and other sources – EUR 94.0 mn in total, as well as market factors – EUR 47.5 mn. These inflows more than fully compensated for the outflows based on net government debt repayment in respect of FX loans and securities (EUR 128.8 mn) and other grounds (EUR 47.6 mn net).

Trading volumes in the IFEM amounted to EUR 474.4 mn in March, up by EUR 40.8 mn m-o-m. In the first three months of the year, IFEM trading volumes totalled EUR 1,402.9 mn.

The dinar strengthened against the euro by a nominal 0.2% both in March and since the start of the year. Against the background of appreciation pressures in March, the NBS intervened in the IFEM by purchasing EUR 135 mn, in order to ease excessive short-term volatility of the exchange rate.

To ensure smooth functioning of the interbank money market in an environment of a slight reduction in dinar banking sector excess liquidity, typical for the start of the new required reserves maintenance period, in March (for the fourth time in 2019) the NBS held an additional EUR/RSD swap auction. At the auction held on 25 March, it swap bought EUR 42 mn, supplying banks with dinar liquidity worth RSD 5 bn for a period of two weeks.

Governor’s Office