NBS: No problems with euro supply, dinar's exchange rate not under threat

BELGRADE - Some exchange offices have experienced only temporary euro shortages due to citizens’ heightened demand for the currency, but this indicates no problem whatsoever when it comes to the supply of euros and other foreign currencies in the Serbian FX market, the National Bank of Serbia (NBS) said on Monday.

"A significant portion of citizens’ demand has been driven by unfounded media and social media reports, which irresponsibly fuel public anxiety despite the NBS’s clear assurances that financial stability will not be jeopardised," the central bank said in a statement.

"In line with its commitment to providing objective and responsible information to the public, the NBS highlights an increase in FX demand in the domestic FX market over the past fortnight. While partly attributable to usual seasonal trends, primarily in the corporate sector, the increase is largely a result of heightened citizens’ demand following the circulation of information relating to the Oil Industry of Serbia - NIS," it said.

"The NBS has at its disposal all necessary mechanisms to prevent any major pressure on the dinar-euro exchange rate, as it has demonstrated - both at the time of citizens’ heightened FX demand during the Covid-19 pandemic and the onset of the Ukraine crisis, as well as in the current circumstances, when it has been using its built-up FX reserves to compensate for the current surplus of demand relative to supply and prevent any excessive exchange rate volatility. We underscore that stability has been preserved for over a decade, in the periods of the most diverse challenges.

We are carefully monitoring all segments of the FX market, including exchange operations carried out both by banks and authorised exchange dealers, and we assure the public that there is sufficient supply of foreign cash in both the banking sector and at the NBS, and that the channel through which banks are supplied with foreign cash is functioning without any disruption.

The fact that some exchange offices lack sufficient foreign cash reflects their failure to source it from banks. Experience from previous similar periods has shown that authorised exchange dealers make limited use of this supply channel and instead tend to source foreign currency among themselves. Furthermore, when public demand increases, exchange offices retain cash for their own clients and raise the price (selling rate) in the exchange market. This means that there is no shortage of foreign cash, but rather that not all channels for its procurement are being utilised.

For the purpose of providing objective and responsible information to the public, the NBS also emphasises that the dinar-euro exchange rate is neither under threat nor will be. In a managed floating exchange rate regime, the central bank retains the right to intervene, through both the purchase and sale of foreign currency, in order to preserve the relative stability of the exchange rate.

Amid the prevailing appreciation pressures in recent years, the NBS has consistently purchased foreign currency, boosting the country’s FX reserves. From 2017 to end-2024, the NBS bought 11.9 bln euros net, while in the first eleven months of this year, it bought 145 mln euros net. This points to a significantly strengthened capacity to mitigate any pressures in the domestic FX market. Responding to occasional depreciation pressures, the NBS uses FX reserves in a cautious, well-calibrated and prudent manner, for one of the intended purposes.

In exercising supervision over banks and authorised exchange dealers, the NBS has at its disposal sufficient tools to prevent any unlawful activity or attempts to destabilise the market.

The NBS will continue to closely monitor all relevant factors in the domestic FX market and, when necessary, take action to preserve the relative stability of the exchange rate," the NBS also said.