BBC Monitoring, September 14, 2001
Yugoslav National Bank Governor Says U.S. Tragedy Will Not Affect Country
Sep 14, 2001 -- (BBC Monitoring) Yugoslav National Bank Governor Mladjan
Dinkic has said that the country's foreign exchange reserves, which were
just 360m dollars when he assumed his post, now amount to 970 million
dollars.
He was certain there was no need for concern about the effect of the
introduction of the euro. Dinkic also said that the financial fallout from
the terrorist attacks on the USA would not harm Yugoslavia. The following is
an excerpt from an interview with Dinkic by the Belgrade-based private BKTV
on 13 September:
[Interviewer Zoran Pavic] Our guest tonight, here in the BKTV studio, is
Yugoslav National Bank Governor Mladjan Dinkic, with whom we will talk about
the current monetary situation. Good evening, Mr Dinkic.
[Dinkic] Good evening.
[Pavic] The monetary sphere was one of the most successful reform sectors in
our country. Really good results have been achieved, regarding both the
stability of the dinar exchange rate and filling the foreign exchange
reserves. Will the dinar be stable in the future, do the foreign exchange
reserves guarantee its stability?
[Dinkic] I have been asked this question ever since I got elected, which is
normal, since citizens have experiences from the previous period. Yes, it
will remain stable. The foreign exchange reserves are significantly larger
than when I assumed the post of governor. We found 360m dollars, now we have
970m dollars. So the foreign currency supply is constantly bigger than the
demand for foreign currency. Really, the dinar is very, very strong...
[Pavic] We will be facing another very important job at the beginning of
next year - the exchange of the currencies of 12 EU countries for the single
European currency, the euro. How will that job be carried out here, given
that the Deutschmark has practically been a reserve currency in our country?
[Dinkic] Well, yes, citizens will find it hard to get rid of their
Deutschmarks, but we have our dinar on one hand, and on the other hand, we
have the euro coming. Today we have started a campaign called: "Euro - a new
DM for Europe", because, really, the euro will replace the DM. The exchange
will last long enough, people need not panic. It will last for five months,
from 1 January till 31 May next year. The exchange will be done without
commission if the money is put into a savings account. So there are two
basic ways of exchange - first, if you put your money into a savings
account, then you convert it into euros without commission; and second, if
you want to convert it directly, cash for cash, the commission is 0.9
percent. We had to introduce this commission because we pay to foreign banks
for transferring euros [into Yugoslavia], and this provision only covers
these real costs of the money transfer...
A stable currency is something that has already been achieved, and I look
upon it as something that only need be maintained. Bearing in mind that
[Serbian Finance] Minister Djelic is very responsible regarding fiscal
policy, I think that, combining fiscal and monetary policy, we will have no
problem maintaining the stability of our currency [as heard]. Another, much
bigger, task that I have started working on is recovering citizens'
confidence in saving...
[Pavic] Let us talk about the foreign debt. We witnessed the beginning of
talks with our creditors, with all those from the London and the Paris
Clubs. We obtained the so-called Naples conditions from the World Bank, that
is, a possibility of two-thirds of our debt being written off, and one-third
reprogrammed over a longer period of time.
[Dinkic] We did not obtain the Naples conditions from the World Bank, but
the so-called IDA [expansion unknown] conditions. No writing off, just
reprogramming.
[Pavic] How much could political events in this country influence the speed
of the negotiations on reprogramming the debt, and when do you expect the
reprogramming to be finished concerning the Paris and the London Clubs?
[Dinkic] Informally, these negotiations started long ago. There were minor
problems, which were solved with the events with The Hague [Milosevic's
extradition], so that there are no political obstacles for these
negotiations now. The negotiations are progressing well and you will be
informed once they are concluded. I expect the main talks to be held in
November and I expect good results...
There is no single reason for citizens not to be paying in dinars, and that
is why we are now preparing a 5,000 dinar banknote for the end of this year,
and, before that, we will issue a 1,000 dinar banknote. It was a rule before
that, when you issue a bigger banknote, that necessarily meant inflation.
This time it will not be like that. We are issuing bigger banknotes solely
due to the fact that the DM is about to disappear, and we want the market to
be based on the dinar. And one day, when we enter the European Union, then
we will accept the euro, I guess.
[Pavic] A horrible thing happened - the World Trade Center disappeared, a
place where the centers of financial power of the USA were located. Will
that terrorist act potentially harm the influx of expected financial capital
into our country, U.S. capital above all?
[Dinkic] I talked to the U.S. ambassador yesterday and I do not expect that
to happen. Nevertheless, we know there will be changes made in the US
budget, military expenditure will increase, as well as expenditure on the
country's security. On the other hand, the preparations for adopting this
budget are almost concluded, it should be adopted by the end of November,
and I think it will be - [changes thought] anyhow, the US aid to Yugoslavia
is just an insignificant part of the enormous US budget, because it is a big
country, so I do not expect to see any major changes. On the other hand,
when it comes to the world economy, there will be consequences, surely. The
blood vessel was hit. The New York Stock Exchange is near, all the biggest
banks had offices there. He who prepared it did not do it just like that. We
will see.
We can already see that the European Central Bank is helping, practically
trying to reestablish confidence in the dollar. The Central Bank wants to
show that it is on top of the situation. We will see from Monday [17
September] on, when everything starts functioning, how things will be. As
for us, as the prime minister said today, what happens on stock exchanges
does not influence us much, unfortunately. Where it does concern us - trade
in old savings bonds [as heard]. We feel sorry, because we had everything
prepared, now we will postpone it. But I think there will be no serious
consequences here. And I think that the whole international community will
be eager to show that life is back to normal as soon as possible, and that
they will meet the responsibilities they have from before. Concerning the
International Monetary Fund, this will not influence their decision on the
second tranche of the stand-by credit.
[Pavic] Thank you very much for being here with us, Governor Dinkic, and
thank you, esteemed viewers. That was all for today. Good night.
Source: BKTV, Belgrade, in Serbo-Croat 1820 GMT 13 Sep 01
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