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Central bank sees high interbank rates until trade balance improves

The National Bank of Slovakia (NBS) on April 8 said it expected local interbank money market rates to remain high until the country's trade balance shows more favorable development. The NBS said in a statement that it was focusing on reversing the negative trend of the foreign trade balance which was a result of domestic credit expansion in 1995 and 1996.
"In general, rates will remain high until more positive results come from the (trade) sector, which could then bring lower prices for both primary and secondary sources," the NBS said in a statement. Interbank market rates have retreated somewhat from record levels of above 30 percent for short-term funds at the end of March.

The National Bank of Slovakia (NBS) on April 8 said it expected local interbank money market rates to remain high until the country's trade balance shows more favorable development. The NBS said in a statement that it was focusing on reversing the negative trend of the foreign trade balance which was a result of domestic credit expansion in 1995 and 1996.

"In general, rates will remain high until more positive results come from the (trade) sector, which could then bring lower prices for both primary and secondary sources," the NBS said in a statement.

Interbank market rates have retreated somewhat from record levels of above 30 percent for short-term funds at the end of March.

Slovakia posted a foreign trade deficit of 10.82 billion Sk ($327.5 million) for the January-February period, down from 13.193 billion Sk for the same period last year. The 1996 full year deficit totalled 64.54 billion Sk, up from a 5.69 billion Sk shortfall in 1995.

"Such an increase of rates for bank clients cannot be seen only as negative as slower credit activities will help achieve external stability and will support savings at the expense of consumption," the NBS said. Bank officials were not immediately available for further comment.

The NBS did not specify at which level it expected interbank rates to hold or whether it planned any measures to reduce credit expansion to improve the foreign trade balance.

It added that "no significant amount of speculative short-term capital flowed into Slovakia in the recent period," as a result of more flexible use of the fluctuation band within which the NBS fixes the crown.

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