February 6 (SeeNews) - The European Bank of Reconstruction and Development (EBRD) said it signed a Memorandum of Understanding (MoU) with Serbia to promote local currency financing for small and medium-sized enterprises (SMEs).
The MoU will pave the way for the EBRD to start using donor funds for its local currency financing programme, which will make dinar loans even more affordable for local businesses, the lender said in a statement on Friday.
Under the agreement, signed by EBRD, the Serbian finance ministry and the country's central bank NBS on Friday, the parties recognise the importance of local currency intermediation and local capital market development and agree to increase efforts to promote local currency lending which shields businesses from foreign exchange risk.
"The EBRD’s readiness to finance SMEs in local currency, bearing in mind that SMEs are a generator of growth and development in many countries, will undoubtedly support further growth of economic activities. Some of the key preconditions for the realisation of this, and many other projects are the result that has been achieved in strengthening the macroeconomic environment. Political, macroeconomic and financial stability are essential for restoring investors’ confidence in domestic economic potential and economic policy,” NBS governor Jorgovanka Tabakovic said in the statement.
The government, NBS and EBRD will now meet on a regular basis to consider specific steps, including technical assistance, to promote the local currency and money market.
EBRD made its first bond placement in Serbian dinars at the end of last year. In December, the bank said the 2.5 billion dinars ($21.7 million/20.2 million euro) bond issue was fully subscribed. The issue is expected to increase the bank’s ability to lend to the Serbian economy in the country's currency and contribute to the "dinarisation" of local finance.
Last year, the EBRD undertook a number of activities to develop local currency and local capital markets in the Western Balkans, notably the establishment of the Southeast European securities trading platform SEE Link, a virtual exchange which allows securities trading across the region. The Belgrade Stock Exchange became the fourth active member of the platform in December. In January, Serbian civil engineering firm Energoprojekt [BEL:ENHL] and oil group NIS [BEL:NIIS] joined the SEE LinX and SEE LinX EWI indices of SEE Link.
To date, the EBRD has invested nearly 4.5 billion euro in a variety of sectors of the Serbian economy.
(1 euro = 123.906 dinars)