On August 4, a parliamentary vote adopted amendments to the law on the National Bank of Serbia (NBS) with over 78% of votes cast (139-39). The amendments will allow increased political control over the Central Bank as its main officials will now be appointed and discharged by the National Assembly. This includes the bank’s governor, vice governors, heads of the newly created administration for the supervision of financial institutions, and members of the bank’s council. An amendment which would have permitted the bank to fund government deficit and public enterprises, effectively softening budget restraints, failed to pass.
The vote came two days after NBS governor Dejan Šoškić handed in his resignation to National Assembly speaker Nebojša Stefanović in a bid to prevent the vote from going ahead. In his resignation letter Šoškić said that he hoped that the removal of his person as governor would not be the “only reason behind the adoption of a bad law.” In his opinion the amendments will deeply undermine the institution’s independence and damage the country’s international reputation as a serious partner in monetary issues, as well as increase domestic financial instability during a time of serious economic crisis.
First reactions from Serbia’s international partners have already been made public: in letters to the NBS, the International Monetary Fund (IMF) and the World Bank warn that the amendments will severely weaken the central bank’s autonomy and the conduct of monetary policy. Further, the IMF expresses its unease about the macroeconomic stability in Serbia following the adoption of the amendments, as well as stating that it might have implications for the Fund programme. Serbia currently has a stand-by agreement with the IMF to the tone of some EUR 1.15 billion, which was frozen by the IMF in February due to the country’s high level of debt.
Similarly, the World Bank voiced its “serious concerns” about the amendments in a letter to the NBS on August 2. It warned that, if adopted, the amendments would seriously undermine the independence of the NBS and send an “unfortunate signal” to financial markets and Serbia’s international partners. The World Bank was also concerned about the speed of which this legislation was pushed through the National Assembly.
With Stefanović stating that he could schedule a session in parliament to appoint a new governor 24 hours after receiving such a proposal, speculation about who will take the NBS helm is rife. Current leader of the SNS parliamentary group and the party’s vice president, Jorgovanka Tabaković, has been named as a likely successor to Šoškić, having been mentioned to reporters on Friday by Minister of Construction and Urban Planning Velimir Ilić. If this is the case, it might cast light on why Tabaković was unavailable for the post of Finance Minister, a position for which she was otherwise perfectly qualified.
These legislative changes represent a step back for Serbia on its path to European integration as the European Union is unlikely to see current developments any more positively than other international actors. If Tabaković is appointed NBS governor it will hint that the action was planned for some time, at least since the coalition negotiations. This episode is an indication that the country’s course may not be as entrenched as had been hoped, and strengthens the impression already forming following the President’s early statements that negotiations with Serbia may become more contentious under the Nikolić administration.
Ágúst Már Ágústsson, Research Associate