STARTING POINTS OF THE CURRENCY POLICY OF THE SLOVAK-REPUBLIC AND ITSCURRENT PROBLEMS

The paper is dedicated to the analysis of the results of the Slovak cu rrency policy in the years 1993-1998, and to the open problems of its future development. The experience from the currency development of th e Slovak Republic confirms that the currency policy of the transformin g economy has to start from the real conditions of the relevant period , and objectives to be achieved. As both these factors change, the pol icy should react to these changes and adapt itself to them. The experi ence of the development in Slovakia has confirmed the fact that up to now even without more drastic monetary measures the real economy achie ved relatively good results, which by GDP growth and inflation decreas e tin 1997 inflation stood at a mere 6.4%) widened manoeuvring room fo r monetary policy. Various developments in the years 1993-1998 show th at after the successful managing of the currency stabilizing phase, pr oblems appeared above all in the years 1996-1997 in the attempt to acc omplish certain development objectives in the changeover from restrict ive, anti-inflationary oriented policy towards more active development currency and credit policy. In this aspect the development in the Cze ch Republic earn be a suitable lesson, as a similar, earlier process h as taken place there. The evaluation of the Czech currency crisis in t he year 1997 demonstrated above all the fact that its origins rested m ainly in serious macro and microeconomic structural and institutional problems which obstruct solution of this crisis and create the continu ing possibility of its relapse. At the same time it was confirmed that the results of currency policy are influenced more than in standard m arket economies also by extra-economy factors. The achievement of the currency objective of the economic policy is thus conditioned above al l by the process in which the whole system in its basic relations crea tes conditions for the rational use of money in macroeconomic policy. From the facts stated above, it follows that in the Slovak Republic lo ng term stabilization and strengthening off;he Slovak currency, defenc e against inflationary tendencies and consolidation of internal and ex ternal currency balance, continue to remain an important currency obje ctive. On the other side the experience from the Czech Republic indica tes that, in relation to further objectives of economic policy, curren cy policy cannot be neutral in the sense of supporting solely the stab ilization monetary objective without the support of economy revival an d growth. Purely monetary criteria in currency objectives without the second objective, the long term stabilization of economy growth based on restructuring, whets successful, have a brief life only, do not fac ilitate long term currency stabilization and permanently threaten a re lapse to the deterioration of the internal and external balance. The c urrency policy approach, respecting the above mentioned dual currency objectives in the transitional phase of economy transformation, repres ent a cei tain combination of expansive credit policy and currency-sta bilizing restrictive fiscal and income policy. In order not to provoke the relapse of inflationary movement by active currency policy, one h as to: start to prepare a complex economic programme oof the optimum i ncorporation of the Slovak economy into the international division of labour, co-ordinate fiscal and currency as well as credit policies, en sure consistent economic selection of the allocation of limited moneta ry resources. The exploitation of credit as a source of an active deve lopment economic policy demands also an adequate credit policy, High i nterest rates would retard entrepreneuring, and primarily investment a ctivity. They would affect particularly unfavourably the development o f private enterprising and the activities of small and medium enterpri ses and tradesmen. The unbalance of external economic relations which originated in the year 1996 by more rapid growth of imports was reflec ted by the increased trade deficit and increased current account of th e balance of payments deficit. In spite of this, the state of currency reserves of the Slovak National Bank did not drop and ensures the cov erage of a 3.4 multiple of the average monthly import. The total state of reserves in commercial banks has an increasing trend. Due to the e xpected restructuring effect of the increased imports, stronger limita tion of imports, in currency policy at the expense of the restructurin g rate decrease would lead in the long run to the violation of the ext ernal balance. As an essential solution one should rather choose the f aster inflow of foreign investments. On the basis of 6 years experienc e the author tries in the present paper to suggest some new views conc erning currency policy during the current economic transformation. At the same time he assumes that the currency problems discussed here are not specific only for the Slovak economy, but in the wider context ca n be meet also in other transforming countries.