GOVERNOR: HNB DOES ITS BEST TO DISCONTINUE KUNA'S APPRECIATION

ZAGREB, June 20 (Hina) - Small oscillations of the national currency have a significant impact on a small economy such as Croatia, and the Croatian National bank (HNB) has undertaken all what is necessary to stop the recent appreciation of the kuna, the HNB Governor, Zeljko Rohatinski, told the parliament on Wednesday. Explaining a report on the central bank's work in 2000, Rohatinski said the two thirds of the money in Croatia were in foreign currencies, and every larger exchange of foreign currencies into the kuna impacts the rate, like it has happened recently, Rohatinski said adding that it will be "our destiny until we introduce the euro." In 2000, liquidity of the banking system increased and average interest rates on the kuna loans decreased from 13.5 to 9 percent, or even to seven percent to very good clients. The interest rate on the HNB's treasury bonds fell from 11 to six percent and this implies that for the commercial banks it was no longer profitable to invest in the central bank's papers rather than in the economy, Rohatinski said. He added that an inflation rate of 7.4 percent was higher last year as against previous years. The so-called basic inflation rate, which does not include foreign and administrative impacts on prices, came to 4.6 percent. In the first five months of 2001 the basic inflation was only 1.2 percent, Rohatinski said. Although last year was the most difficult for the payment of the foreign debts when Croatia had to settle 2.6 billion US dollars of foreign loans, Croatia's foreign exchange holdings rose by $580 million, the HNB governor said. The central bank registered a profit of 356 million kuna last year, and 209 million kuna of profit in the first five months this year. It expects a profit between 470-480 million kuna until the end of this year and this presents an income into the state budget, he added. (hina) ms