The foreign exchange reserves of the National Bank of Serbia have increased due to the jump in the price of gold on the international market. This does not mean that the country is richer. Even though it made money due to circumstances, the NBS still spends foreign exchange to defend the exchange rate
The foreign exchange reserves of the National Bank of Serbia have increased due to gold prices which is growing in the markets, but they were also spent in February on the defense of the exchange rate. Although the demand for euros is lower than in January, in the past month the NBS gave 200 million euros from reserves to keep the dinar at the same level. The rise in gold prices increases reserve value, but gold is the least liquid form of reserves and is also subject to large changes in value depending on the worsening or calming of the geopolitical situation, writes Aleksandra Nenadović for The new economy.
"In February 2026, the value of the dinar was almost unchanged against the euro, while during the first two months of 2026, the dinar nominally weakened against the euro by 0,1 percent. The National Bank of Serbia sold 200 million euros on the interbank foreign exchange market in February. Since the beginning of the year, the National Bank of Serbia sold 810 million euros in order to maintain the relative stability of the exchange rate of the dinar against the euro," the NBS said in a statement.
Outflows from foreign exchange reserves were realized based on the intervention of the central bank on the domestic foreign exchange market by selling foreign currency in the amount of 230 million euros, of which 30 million euros refer to the sale of foreign exchange contracted at the end of January, which was executed/settled, i.e. had an effect on the outflow of foreign exchange in February, and 200 million euros to the sale of foreign currency contracted and settled in February, in accordance with usual market principles). Other outflows were realized based on the net deleveraging of the state in the name of foreign currency loans and other foreign currency liabilities in the total amount of 155 million euros, the NBS announced.
The largest inflows into foreign currency reserves in February were realized on the basis of the allocation of mandatory foreign currency reserves of banks in the net amount of 150,1 million euros. Also, larger inflows were realized on the basis of the net sale of state bonds on the domestic financial market in the amount of 53,6 million euros, as well as on the basis of the management of foreign exchange reserves, donations and on other grounds in the total net amount of 48,5 million euros, according to NBS data.
Net foreign exchange reserves (gross foreign exchange reserves minus banks' foreign currency assets based on mandatory reserves, obligations to the International Monetary Fund based on arrangements and other bases) at the end of February amounted to 25,3 billion euros and were also at their highest level observed at the end of the month. Compared to the end of January, they increased by 297,1 million euros. Gross reserves at the end of February amounted to 29,9 billion euros and increased by 421,3 million. euros.
The net market effects were positive in the amount of 554,1 million euros and are the result of movements in international markets - primarily, the increase in the price of gold in dollars by about 4,8 percent, as well as the strengthening of the dollar against the euro by about 1,0 percent, according to the data of the central bank.
"Gold reserves, which are part of foreign exchange reserves, amounted to a record 53.411 kilograms at the end of February and had a value of 7,6 billion euros, which was 25,5 percent of gross foreign exchange reserves. During February, gold reserves increased by 326,2 kilograms by purchasing 26 gold bars on the domestic market from the company Srbija Ziđin Koper. Also, in February, the value of gold reserves in euros increased by 463,9 million euros, mostly due to the action of market factors (increase in the price of gold in dollars, as well as strengthening of the dollar against the euro), and to a lesser extent due to the purchase (increase in the amount) of gold during the month. During the year 2026, gold reserves increased by about 0,9 tons, while their value increased by 1,4 billion euros (in an environment where the value of a fine ounce of gold in dollars increased by about 21,2 percent and the dollar weakened against the euro by about 0,6 percent on the international market)", he states National Bank.
A rising gold price may temporarily increase total reserves, but it does not solve the structural problem of losing foreign exchange while defending a fixed exchange rate. If the central bank relies on gold gains instead of reducing foreign exchange outflows, the fixed exchange rate may become unsustainable at some point, and the country could face a sudden currency correction.
If the central bank consistently spends more foreign currency than it earns, it erodes its usable reserves. Even if gains from gold temporarily offset those losses, liquidity in usable foreign currency for example for imports, debt repayment, may be reduced.
In other words, the current increase in total reserves is partly a "paper gain" rather than liquid cash. The cash is spent on defending the exchange rate.
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