Serbia’s central bank chief has called on the IMF and European Central Bank (ECB) to intervene against a draft central bank law, claiming it threatens the institution’s independence. Radovan Jelasic, newly reappointed governor of the National Bank of Serbia (NBS), has also criticized the country’s parliament for failing to understand his mission for price stability.
“We have no problems about people giving their opinion, but we definitely do not want to be limited in carrying out our policies by any appointed members of the council. We at the central bank are not going to be quiet about this,” he told Emerging Markets in an interview.
He was responding to the government’s announcement that it was considering a new law that would allow it to appoint members to the governing council of the NBS. Jelasic appealed to the government to consult with international institutions when drafting the new legislation, fearing this move risks undermining his inflation-targeting mission and Serbia’s economic development. “What is really important is that the government gets comments about the consequences of implementing this law from the ECB and IMF.”
Serbia’s parliament last month approved Jelasic’s appointment after a heated two-day debate. Deputies from the opposition Serbian Radical Party and Socialist Party of Serbia refused to vote, criticizing the governor’s calls for politically-sensitive structural reforms as well as his monetary tightening stance.
Jelasic feared the controversy over his re-election undermined the reputation of the central bank, and underscored politicians’ ignorance of monetary policy. “It was not a pleasant thing to get re-elected like that – especially when the vast majority of parliament spoke about the losses in the balance sheets of the central bank last year, rather than our crucial successes in maintaining price stability.”
Last year, the NBS began targeting core inflation, and kept the currency stable by buying and selling dinars on the market. Jelasic explained that popular support garnered by his successes in reducing inflation to single-digits this year, may provide the institution with leverage to maintain its independence.
“I am not convinced that the politicians really know about the basic function of the central bank and our role in aiming for price stability. But the public understand this alot better, we are popular and this should help.”
Nevertheless, he argued that the direction of monetary policy was not the key obstacle to Serbia’s development and its desire to become an EU candidate by 2008. Instead, Belgrade’s non-cooperation with the UN war crimes tribunal for the former Yugoslavia fundamentally clouds Serbia’s economic prospects.
“The issue of the Hague Tribunal will take up political space and will continue to do so,” he said.