The current pressure weakening the dinar against the euro will prove temporary if the new government implements good fiscal consolidation measures promptly, National Bank of Serbia (NBS) Vice Governor Bojan Markovic said on Friday.

If the measures are not applied soon, the NBS will have to react by increasing significantly the reference interest rate and the level of required reserve in order to preserve price and financial stability, which will affect the Serbian economy, Markovic stressed during the second day of the 1st Summit of Financial Directors in Arandjelovac. "Such a form of preserving stability has its cost and will be a problem for the economy," he noted.

The NBS interventions since the start of the year have reached around EUR 1.2 billion, and such intensive interventions only make sence if the shocks affecting the dinar's value are expected to be temporary, he remarked. The Fiscal Council presented a fiscal consolidation programme a few days ago, which "seems very valid," Markovic stated.

The foreign exchange market reacts, not only when measures are introduced, but also when their introduction becomes certain, which is why the market could stabilize as soon as June or July, he explained. A general fiscal consolidation is a requirement for successful dinarization of Serbia's financial system and long-term low interest rates for the economy, he stressed.