Serbia Likely to Get New Central Bank Chief on Monday

Nebojsa Stefanovic, the Serbian parliamentary speaker, said that he may convene a session on Monday to elect the new central bank governor.

"It depends whether a proposal for the new governor arrives in time to honour the parliament's procedure," Stefanovic said.

The governor is elected by the Serbian parliament on the recommendation of the president of the state.

Dejan Soskic, the previous governor of Serbia's central bank, handed in his resignation on Thursday over proposed amendments to the law on central bank.

"The reason for the resignation are the proposed changes to the Law on the National Bank of Serbia which, in my opinion, significantly curtail the independence of the central bank," Soskic said in a statement.

Soskic resigned at the moment when the new Serbian government is considering changes to the law on central bank, strengthening parliament's control of the bank while limiting the powers of the bank's governor and senior management.

The proposed amendments would have paved the way for Soskic’s dismissal.  Under the existing law it is practically impossible to dismiss the governor because only the NBS Council can propose it and the Finance Committee and Parliament then need to vote on it.

Couple of weeks ago, Prime Minister Ivica Dacic ominously said that Soskic, may lose his job if he keeps on “tightening the belt” rather than seeking to stimulate growth.

The nationalist-led government comprised of the Progressives, the Socialists and the United Regions of Serbia, has pledged to reform the fiscal sector, curb the state spending, and improve transparency in public procurement.

However, they have refused to freeze pensions and salaries in the public sector, as the bank wants.

The Socialists also say they want the new government to draw on Serbia's foreign reserves to stimulate the economy, a policy that Soskic strongly opposes.

The bill amending the law on the central bank will be debated on Friday while its amendments are due to be discussed on Saturday.

Both the EU and the IMF have voiced their concerns over the events surrounding the adoption of amendments to the Law on the National Bank of Serbia, NBS, saying that proposed changes would jeopardize the central bank's independence.

“The Commission is very carefully monitoring the development of the situation regarding the NBS and we are deeply concerned about what we see,” Peter Stano, spokesperson for the EU Enlargement Commissioner, told Serbia's news agency Tanjug.

Reza Moghadam, the IMF Director for Europe, said that the amendments could significantly affect Serbia's macroeconomic stability.

"The adoption of these amendments would create insecurity, damage policy, credibility and impose questions about the correctness of the macroeconomic policies," Moghadam stated in a letter to Soskic.

The central bank is one of the few state institutions to have so far preserved its independence while maintaining relative stability in the financial system.

In recent months, the bank has succeeded in getting the annual inflation rate below 3 per cent, a record low.