ZAGREB, Aug 27 (Hina) - At Wednesday's session presided by governor Zeljko Rohatinski, the Croatian National Bank Council passed a decision under which banks' required foreign exchange reserves are to be increased from the current 25
to 35 percent.
ZAGREB, Aug 27 (Hina) - At Wednesday's session presided by governor
Zeljko Rohatinski, the Croatian National Bank Council passed a
decision under which banks' required foreign exchange reserves are
to be increased from the current 25 to 35 percent. #L#
The decision is part of amendments to a previous decision on banks'
required reserves, the central bank said in a statement after the
session.
The decision is the first of several steps which the central bank
will take if warranted, in line with item 14 of the Supplementary
Memorandum of Economic and Financial Policies, which the
government and the national bank forwarded to the International
Monetary Fund on July 4.
Item 14 of the document reads: "The measure introduced in early 2003
to slow down credit expansion is temporary. The CNB (Croatian
National Bank) intends to replace it by prudential and more price-
based measures at the end of 2003. In the meantime, the CNB will not
hesitate to enhance the effects of the current measure by
tightening banking sector liquidity through an increase in minimum
reserve requirements if warranted by developments in domestic
inflation, credit growth and the external current account balance.
To this end, the second review under the programme will focus on any
monetary and other measures that may be needed to keep external
developments in line with program targets," the central bank said
in its statement.
Governor Rohatinski had been announcing the said measure in the
past several days.
The increase of the compulsory foreign currency reserves would
secure the immobilisation of some 2.1 billion kuna (approx. EUR281
million) in banks, in an attempt to curb the increase in monetary
aggregates.
Rohatinski has already announced new monetary policy measures
should today's decision not yield expected results. In that case,
the central bank would increase the rate of banks' required
reserves from 19 to 22 percent, and if this should also prove to be
insufficient, there will be restrictions in capital transactions,
such as the introduction of interest-free deposits for loans taken
by banks abroad in the amount of 30 percent of the loan.
According to the central bank's data, Croatia's overall foreign
debt reached US$18.56 billion on June 30, an increase of US$3.22
billion in comparison to the beginning of the year. The state
accounted for US$7.37 billion, or 37.8 percent, of the debt, almost
$1 billion more compared to December 31, 2002.
Banks' share in the debt also increased by one billion dollars, to
five billion, while other sectors accounted for US$4.7 billion of
the total foreign debt.
The central bank's data indicate that the deficit of the balance of
payments current transactions was US$2.45 billion in this year's
first six months, a 49.3 percent increase in relation to the same
period last year.
(hina) lml