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Serbian Currency Continues To Fall Amid Weak Economy

The Serbian dinar has lost 30 percent of its value in the past year and a half.
The Serbian dinar has lost 30 percent of its value in the past year and a half.
BELGRADE -- The Serbian currency fell against the euro this week to break the 100 dinars to 1 euro barrier, and analysts said it will continue to decline, compounding Serbia's economic hardship, RFE/RL's Balkan Service reports.

The dinar has lost some 30 percent of its value since the start of the global economic crisis in the fall of 2008. But analysts say the Serbian economy has benefited little from the devalued currency because of the small number of export-oriented companies in Serbia.

Economists say many Serbs will have problems making ends meet as the average monthly salary in the country is some 33,000 dinars ($402), while a family of four is expected to need about $500 a month to cover its basic needs.

Serbia officially emerged from recession in the first quarter of 2010. Prime Minister Mirko Cvetkovic said on May 17 that the International Monetary Fund -- with which Serbia agreed to a $3.58 billion standby loan last year -- should consider letting the Balkan country unfreeze public sector wages and pensions before 2011 in order to ease the crisis.

Cvetkovic said a basic problem is the practice in which prices are displayed in dinars but transactions are made in euros. "We actually have a problem in our economic and financial system, which functions according to the two-currency system," he said.

Djordje Djukic, professor of economics at Belgrade University, told RFE/RL that propping up the dinar through intervention in the market is something the government should not even consider.

"That would be possible but [only by] spending an enormous amount of hard currency reserves, which I consider equal to economic suicide as these reserves have been accumulated through borrowing," Djukic said.