As stated in the NBS announcement, the bank performed a reverse repo transaction - the sale of securities with their repurchase after a set period - in this case of one week. The auction implies a multiple variable interest rate, while the maximum interest rate is 5,75 percent. The repurchase date is seven days from the day of the auction, i.e. July 16, 2025, writes Aleksandra Nenadović for The new economy.
Where did such a sum come from all of a sudden?
Why withdraw liquidity from banks at this time when they interest high, and the announced increase in gross domestic product relies on consumption, both public and private? Where did the surplus of three billion euros come from on the Serbian market and is it due to the persistent inflation that has been plaguing Serbia for several years? In May, the price increase was 3,8 percent, according to RZS data. NBS today left the reference interest rate at 5,75 percent, and has kept it at the same level since September last year.
"If it is such a short period of time for repurchase, each player can speculate what they will do there. Bankers are rubbing their hands, because they will make money. So they want to squeeze out that liquidity for a short period of time. For such a short period of time, why is such a large sum withdrawn from the liquidity of the banking industry? Where did such a sum come from all of a sudden?", asks professor from the Faculty of Economics in Belgrade, Đorđe Đukić.
It is certainly strange that despite the fact that there is excess liquidity on the market, in just seven days you manage to influence inflation by withdrawing those funds.
Vladimir Vasić, a financial consultant, explains to New Economy that although this figure may seem like new borrowing, it is important to understand that NBS bills are not government debt, but an instrument of monetary policy. Treasury bills issued by the central bank serve as a means of withdrawing excess money (liquidity) from the banking system, maintaining control over inflation and stabilizing interest rates in the money market.
"Inflationary pressure may be the reason. It seems that there is practically an excess of liquidity on the market, so it is now being withdrawn. I don't see that there is, but maybe now they want to bring down this inflation, because it is quite high. It is twice as high as in the European Union. Paradoxically, even though dinar money is expensive (due to the high reference rate), there is still excess liquidity in the system. The main reasons for this are increased government spending, especially through the growth of wages and pensions, foreign exchange interventions by the NBS - by buying foreign currencies, the central bank injects dinars into the system, as well as the slow transmission of monetary policy, because the banks still have room for the placement of funds", says Vasić and adds that in such conditions, without sterilization, i.e. withdrawal of excess money, inflation could strengthen again and the value of the dinar could weaken.
In practice, banks invest excess dinars in these bills, which temporarily "locks" the money out of circulation, which helps the central bank keep inflation under control.
"Issuing treasury bills worth 360 billion dinars is a clear signal that the NBS wants to maintain monetary discipline, to react to excessive liquidity and to prevent a potential return of inflation. At the same time, this is also a warning that interest rates in Serbia will not fall quickly, and that loans, both for citizens and the economy, will remain expensive for some time," explains Vasić.
Đukić is of the opinion that inflation cannot be cured by managing the liquidity of the banking industry in the super short term.
"Inflation can only be solved by systematically looking at the causes on the demand side, i.e. by gradually, not suddenly, reducing the amount of money and that the central bank is bound to keep the key interest rate at higher levels, and if the situation is alarming, to increase it," explains Đukić.
What is possible is that in the future, the NBS will also act through the sale of treasury bills at securities auctions, which take place once a week according to the calendar on their website.
Who earned it?
In this whole situation, the banks did the best. According to our source from this sector, the offers from the banks went up to 442 billion dinars, with interest rates ranging from 4,51 percent the highest, and the average at 4,50 percent. All 360 billion dinars of treasury bills were sold by the central bank in Belgrade at yesterday's auction.
"If the liquidity of the banking industry is subtly managed, then it is not desirable to go out with huge amounts on the shallow market because it is inappropriate for the depth of the money market. It is perfect for the banks - NBS bills, risk-free securities, flowing interest, ma milina... I am not speaking pejoratively, but truly," says Đukić.
