, 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 : •

radovan jelasic : monetary policy, current economic movements and challenges facing serbian economic policy speech by mr radovan jelasic, governor of the national bank of serbia, at the press conference on the international savings day, belgrade, 29 october 2004. * * * 1. deposit base • the banking sector deposit base as of august 31 amounted to 274. 2 billion dinars, registering an increase of 51. 2 billion dinars, i. e. 22. 8 %, compared to the end of the last year balance. • total savings ( dinar and foreign exchange ) as of august 31, 2004 reached the amount of 106. 3 billion dinars, which is about 21. 3 million dinars ( + 25. 1 % ) higher than at the end of 2003. • so far this year, as of october 19, new foreign exchange savings deposits increased by 25. 1 %, or eur 261 million, exceeding the amount of eur 1. 3 billion, i. e. usd 1. 6 billion. • the increase in savings and domestic accumulation increase represent a vital condition for a vigorous lending activity of the banks, which means not only new investments - new employment opportunities, but also lower interest rates. the nbs announces a campaign : save more today so as to have more tomorrow • as part of activities designed to celebrate october 31, savings day, and with a view to stimulating an increase in savings, the national bank has supplemented its regulations relieving the banks from the compulsory allocation of a part of newly deposited foreign currency savings with the nbs in the period from november 1 to november 7 this year. the nbs hopes that banks shall also confirm in practice their professed readiness to ensure that the total effect of this measure be felt by the end - users, that is, savings depositors. • for savings deposited in the course of the “ savings week ”, banks will apply higher than usual interest rates, up to 2 percent annually, or a fixed bonus ( one - off reward ) as well as special privileges for certain population groups ( newborns, newly married couples … ) etc. the nbs hopes that this facility shall contribute to a more widespread response of savings depositors and to a further strengthening of the banks ’ deposit base, increasing, in return, their lending potential. 2. lending activity in the course of the first eight months this year, total lending of the banking sector increased by 30. 4 %, or 73. 7