CNB Council increases Lombard rate

Published: 1/4/1998

The Council of the Croatian National Bank chaired by governor dr. Marko Skreb met on Wednesday to review recent monetary and economic developments and to consider the adoption of adequate monetary policy measures for the upcoming period. Mr. Borislav Skegro, finance minister of the Republic of Croatia, and Mr. Djuro Njavro, president of the Parliamentary Committee for Budget and Finances also attended the meeting.

Main indicators confirmed that the country's macroeconomic framework remained stable: retail prices in March were by 0.2 percent higher than in the previous month, while the cost of living went up by 0.5 percent compared to the previous month. Producer prices went down by 1.9 percent, showing that this indicator has decreased the third month in a row. Industrial production grew by 3.9 percent on a two-month basis. Other indicators also confirm that economic activity showes further signs of recovery. The kuna exchange rate continued to be stable, except for minor fluctuations. The increase in wages has slowed down and it has not been in disagreement with the existing productivity levels. At the beginning of this year, revenues of the government budget were considerably higher than in the first quarter of 1997. All these indicators show that the "shock" of a huge change in the tax system has been successfully overcome.

Members of the Council of the Croatian National Bank agreed that - in order to preserve the stability of the macroeconomic framework which represents a precondition for a healthy and sustainable economic growth - in the upcoming period special attention should be given to balance of payments developments and supervision of the banking system. Expert teams of the Croatian central bank have been instructed by the Council to develop and prepare measures to be used for effective reducing of the credit expansion of commercial banks (lending of commercial banks grew in February by 1.4 billion kuna, that is by 2.9 percent). This expansion was primarily based either on taking of loans abroad or attracting of deposits with irrationally high deposit rates.

For the purpose of achieving the aforementioned targets, the Council reached several decisions. Pursuant to one of those decisions, the lombard rate has been increased from 9.5 to 11 percent. The second decision offers commercial banks the possibility to voluntarily purchase CNB bills denominated in USD or DEM. These bills can be used as collateral for lombard credits, and are to be considered a part of the obligatory amount of foreign exchange assets or other liquid assets that banks have to redeposit on their accounts abroad as a percentage of short-term foreign exchange savings deposits.

The Council of the Croatian National Bank accepted the 1997 Annual Report of the Agency for Domestic Payments, as well as the work plan and the budget for 1998. Prva obrtnička stedionica d.o.o Zagreb,Stedionica Sonic d.o.o. Zagreb and Gospodarska stedionica Adriatic d.o.o. Vrbovec were given approval to engage in foreign exchange operations. At its Wednesday meeting, the Council approved the nominations of Mr. Milivoj Goldstajn and Ms. Sanja Rendulic for Members of the Management Board of Zagrebacka banka, as well as the nominations of Ms. Marija Znidarsic and Ms. Jovanka Tubin for Members of the Management Board of Gradska banka Osijek. The Council also agreed with the nomination of Ms. Zdravka Cukon for the Chairman of the Management Board of Laguna banka d.d. Porec.

On the occasion of the 100th birth anniversary of the Croatian cardinal Alojzije Stepinac, the central bank will issue commemorative gold and silver coins. The commemorative gold coin will be issued in denomination of HRK 500, and the silver coin in denomination of HRK 150. The Croatian Mint was given approval for minting the gold medal "World Football Championship - France 1998".