Business

Liquidity More Than Sufficient to Enable Smooth Cash Flow for Businesses

By 18 March 2020

ZAGREB, March 18, 2020 - Croatian National Bank (HNB) governor Boris Vujčić informed the government on Tuesday that the country possessed very high foreign currency reserves and that system liquidity was more than sufficient to ensure the cash flow for businesses.

Presenting the central bank's measures designed to mitigate the economic consequences of the crisis caused by the outbreak of COVID-19, Vujčić said that he expected a sharp but short contraction of economic activity, primarily as a result of efforts to contain the spread of the coronavirus.

There are forecasts that this situation will be relatively short, lasting three, six or eight months. Of course, the shorter the crisis, the lesser the impact on the economy, the HNB governor said.

Vujčić said that the HNB had prepared three groups of monetary policy measures.

One refers to the stabilisation of the kuna exchange rate and to ensuring foreign currency liquidity. In this context, Vujčić recalled that in the last four interventions, the central bank sold €1.63 billion to commercial banks so as to stabilise the kuna exchange rate at 7.57 per euro.

Foreign currency reserves stand at €19 billion.

The second set of measures focuses on making sure that there is enough kuna liquidity and therefore the central bank has conducted structural and repo operations. On Monday, 750 million kuna was injected into the banking system as a short-term measure, plus 3.8 billion kuna as a long-term measure for a period of five years and at an interest rate of 0.25%.

The third group of measures refers to support to the stability of the state securities market through the purchase of government bonds.

If Croatia were a member of the euro area, some of these measures would not have to be implemented, said Vujčić.

We would also have access to the European system of monetary stability, where €500 billion is available, he said.

More coronavirus news can be found in the Lifestyle section.

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