Since November 2022, the National Bank of Serbia (NBS) has been actively withdrawing liquidity from the market via reverse repo operations (repo sales of treasury bills). This practice aims to manage excess dinar liquidity in the banking sector and maintain price stability.
Reverse repo transactions involve the NBS selling treasury bills to banks with an agreement to repurchase them later, typically within seven days, paying interest (~4.5% on average in 2025). This temporarily absorbs liquidity from banks.
On July 9, 2025, the NBS withdrew 360 billion dinars, returning the amount plus interest on July 16. Monthly claims from such operations range between 300 to 500 billion dinars, reflecting a significant increase from 50 billion dinars in 2022.
This rise correlates with growth in exports, foreign investments, and foreign exchange reserves, requiring sterilization of excess liquidity to maintain price stability.
Economists debate the reasons for increased repo operations: some see it as a budget financing tool amid rising expenditures (e.g., EXPO projects, sanctions on NIS, Rafale jets purchase, salary and pension hikes), others link it to inflation control or currency stabilization.
Despite increased liquidity withdrawal, the central bank has kept its reference interest rate unchanged since September 2024, relying on repo operations as its primary monetary tool.
Inflation in Serbia was 4.6% in June 2025, largely driven by food prices and upcoming electricity price hikes. The NBS’s inflation target corridor is 3% ± 1.5%, and inflation is expected to remain near but slightly above target through 2026-2027, according to IMF forecasts.
The NBS emphasizes that the success of repo operations is measured by achieving price stability rather than their scale.
Some experts argue that repo operations alone cannot fully control inflation and highlight concerns about inflationary expectations influencing monetary policy decisions.
