A Governor Above the Law

According to the Law pertaining to the NBJ, the Governor is to submit a report on projected monetary policy for the following year to the Federal Assembly at the beginning of the year, and twice during the year he is to submit reports on its implementation and the general state of affairs in the banking system

This is what the law says. But, things look different in practice. Let us take a look at the Program for the reconstruction of the monetary system. It was not seen in the Assembly. This rather strange practice with regard to a package of stabilization measures is certainly a novelty when compared to similar programs in other countries. At the same time, the parliamentary deputies have never had the opportunity to discuss the NBJ's monetary policy.

Now is the time for the Governor to make an appearance in the Federal Assembly and explain why he departed from the policy on monetary availability in June of this year, a policy which had quickly ensured the dinar's stability at the beginning of the year. The printing of money without foreign currency back-up is another great danger to the dinar, and we would all like to know how much money the NBJ is going to issue by the end of the year. At the same time, Avramovic might explain the situation concerning the gold dinar and how many such dinars were actually issued to the farmers for the wheat buy-up. Was everything in order with the "wheat bills of exchange", and to what extent is the NBJ to be blamed for their failure? A subject that is no less interesting is the solvency of the banks and to what extent the NBJ contributes to keeping bankrupt banks afloat. The story about the bankruptcy of "Dafiment Bank" could easily fit into this context.

There are topics galore to be discussed. The deputies are not opposed to the Governor spreading some optimism when he talks of big salaries and pensions, low taxes and new investments. Hope is the basis of all activities. But apart from hope, there is also responsibility for the monetary and banking system. If the Governor finds time to solve other problems, this is just fine, and it is a good thing. But in the meantime, we do expect him to resolve those problems for which he is responsible under the law.

As far as I know, the Governor is not prepared to come to the Federal Assembly. In this, he has the wholehearted support of Chamber of Citizens' Speaker Radoman Bozovic, who even refused to put one such proposal to the vote. It is possible in these parts to be above the law, but this kind of privilege lasts only for as long as things are going well. Unfortunately, the dinar is not doing all that well, and this is the responsibility of the people in the NBJ and the ruling Socialist Party of Serbia (SPS) coalition in the Federal Assembly. The first test of its responsibility will be the law on the NBJ's obligation to issue a regular monthly report informing the public of the amount of dinars that have been issued. When money is being issued without foreign currency back-up, the only way to avoid panic and speculations is to tell the people the truth. Only then will a good NBJ policy - if it is still a good one - be understood as such and won't give rise to a rush of inflationary expectations.

The October 20 example is very instructive. In only one day, the price of petrol doubled and the stizung of the dinar appeared - this was a normal reaction by the public to the increased quantity of money in circulation. After surviving two hyperinflations, the people are very quick at sensing inflationary trends and the Governor should know that from now on every wrong move he makes will be followed by a stormy reaction on the market. Within this context, observing the law could help return trust in the NBJ, something which would do more towards calming the market than the arresting of dealers and the spreading of false hopes.