, the main issue is not what the dinar exchange rate will be, but whether we ourselves are spurring inflation on by excessive domestic consumption. 4. monetary policy at present, there is barely any room for tightening the monetary policy, primarily due to the fact that it is already extremely restrictive, which has been arrived at through measures implemented in august this year : • increase of banks ’ required reserves rate from 18 % to 21 % • increase of interest rates, and • changed method of calculating required reserves. as regards a possible relaxation of the policy, it will depend primarily on the budget deficit realized until the end of the year, as well as by the wages policy of the government. in such a situation, with room for further tightening of the monetary policy is restricted, a still more responsible policy of the rs government is required for the implementation of the economic programme as agreed with the international monetary fund. this can be achieved through : • restrictive fiscal policy, directed at limiting public consumption and incomes • increase of the efficiency of public companies, primarily through a. accelerated separation of core from ancillary activities b. privatization c. reduction of the number of employees. • privatization of the real sector and the banks • privatization of large public companies in the process of restructuring. 5. foreign exchange reserves foreign exchange reserves remain stable at usd 3. 76 billion. in the course of 2004, there occurred an increase of as much as usd 218 million, although this was partly due to euro / dollar exchange differentials. when it comes to dealers, ending with this week, the nbs will have purchased a total of approximately usd 1. 42 billion, which is equal to the amount purchased from dealers in the course of the entire 2003. when it comes to the sale of foreign exchange, the nbs sold a daily average of usd 7. 9 billion on the interbank foreign exchange market. foreign exchange trade among banks increased considerably. in october, ending with october 28, the trade between the nbs and the banks, amounted to usd 5. 1 million, while among banks alone it amounted to usd 10. 9 million. although for a central bank : • inflation can never be sufficiently low and • foreign exchange reserves can never be sufficiently high the present level of reserves does represent a solid basis for a continuation of the exchange rate policy as it has been to date. 6. serbian state budget for 2005 the nbs has given its support to the serbian state budget for 2005, pointing out the following issues : •

account and fdi projection ( in eur bn ) ( in % of gdp ) 1. 4 fdi, net goods services primary income, net secondary income, net current account deficit 0. 8 0. 8 primary income goods fdi 1. 2 secondary income services current account 0. 6 1. 1 - 0. 2 - 1 - 1. 8 - 2 - 0. 6 - 0. 4 - 1. 5 - 0. 7 - 5 - 10 - 15 - 20 - 25 source : - 3 nbs. q1 2023 q1 2024 2024 * 2025 * 2026 * sources : sors and nbs. source : nbs. * nbs projection. the current account deficit remained relatively low and in q1 this year equalled 2. 3 % of gdp, with a reduced deficit in goods and services trade as a result of the continued growth of manufacturing exports, a two - digit hike in services exports and the rebound in agricultural commodities exports on the one hand, and lower energy imports on the other. the current account deficit was covered by fdi inflows to serbia many times over, given that in the first three months of the year they equalled around eur 1. 3 bn, while including the preliminary data for april, they reached eur 1. 7 bn, thus supporting the continuation of appreciation pressures. under these circumstances and in order to maintain relative stability of the dinar vis - a - vis the euro, in the four months of the year the nbs intervened by net purchasing fx in the amount of eur 530 mn. all of the results i presented, including the reduction in fiscal imbalance and the downward public debt trajectory, but primarily the resilience our country has shown in the past years, have driven standard & poor ’ s last month to raise serbia ’ s outlook for obtaining investment grade. this is yet another confirmation of our responsible economic policy conduct in the years riddled with global insecurities and overlapping global crises. increasing serbia ’ s credit rating to investment grade is one of the strategic goals of the nbs and the government. once it is reached, it will ensure that serbia is even better recognised on the international investment map and that it has more favourable conditions for financing the government, corporates and households. 8 of 10 ladies and gentlemen, dear colleagues, we will now take a closer look at risks which, if materialised, could affect the deviation of achieved inflation and economic activity in the