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FX Reserves and IFEM Movements in April

Gross NBS FX reserves amounted to EUR 11,336.0 mn at end-April, covering 178% 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).  In the past year (end-April 2019 vs. end-April 2018), gross FX reserves expanded by as much as EUR 906.4 mn (almost fully on account of NBS FX interventions – EUR 1,105 mn), in an environment in which the Republic of Serbia made net repayments against FX loans and FX securities by over EUR 1.8 bn.

Net FX reserves (FX reserves less banks’ FX balances on account of required reserves and other requirements) equalled EUR 9,362 mn at end-April. 
At end-April, gross FX reserved declined by EUR 104.5 mn relative to end-March – fully on account of the government’s effort to significantly reduce its FX debt, whereby it contributes to the reduction in public debt and improvement of its currency structure. In April, the government repaid EUR 130.2 mn net on account of early and regular repayment of FX loans and securities issued in the domestic market.

The inflows to FX reserves – which came from NBS activities in the interbank FX market (EUR 80.5 mn), efficient FX reserves management, grants and other grounds (EUR 52.8 mn in total), including a positive net market effect (EUR 4.3 mn) – were more than sufficient to cover the outflows prompted b banks’ activity with regard to FX reserve requirements (EUR 64.7 mn) and other grounds (EUR 47.2 mn).

Trading volumes in the IFEM amounted to EUR 448.8 mn in April, down by EUR 25.6 mn relative to March. In the first four months of the year, IFEM trading volumes totalled EUR 1,851.7 mn.

At the month-level, the dinar stayed broadly unchanged against the euro. Since early this year, it has nominally depreciated against the euro by 0.2%. Against the background of occasional appreciation pressures in April, the NBS intervened in the IFEM by purchasing EUR 75 mn, in order to ease excessive short-term volatility of the exchange rate.

In April, for the fifth time in 2019, the NBS held an additional swap auction – in the first leg, it swap bought EUR 42.5 mn from banks on a two-week term, supplying them with dinar liquidity worth RSD 5.0 bn. The additional auction was held to ensure relative stability of short-term market interest rates at the start of the new maintenance period.

Governor’s Office