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BLOOMBERG (USA) Serbian Central Bank Warns Politics May Impact Credit Ratings By Aleksandra Nenadovic Jan. 29 (Bloomberg) -- Serbia's central bank warned today that political developments, including February presidential elections and a possible declaration of independence by disputed Kosovo province, may affect the country's credit ratings. The bank also said that if necessary it was ready to use its foreign currency reserves to bolster the dinar and contain inflation. Run-off elections on Feb. 3 pit pro-Western President Boris Tadic against Tomislav Nikolic, an advocate of closer ties with Russia and an opponent of state-asset sales. Nikolic finished the first round of voting on Jan 20 with a 4 percent lead. The U.S. and European Union support Kosovo's bid for independence, which Russia and Serbia oppose. ``These risks could result in a drop in Serbia's credit rating by international rating agencies and poorly influence the perception of participants in the financial markets and industry,'' the Belgrade-based bank said in an e-mailed statement. ``An increase in country risk premiums would lead to an increase in interest rates.'' Central bank Governor Radovan Jelasic said in a Jan. 21 interview that the bank used some of its $16 billion in foreign currency reserves to support the dinar in May after Nikolic's election as parliamentary speaker caused the Serbian currency to slide as much as 3.5 percent and the stock market to lose about 25 percent of its value. Inflation accelerated to 11.9 percent in December from 10.4 percent in the previous month. Standard & Poor's Rating Services said on Jan. 21 that the outcome of Serbian presidential elections would have no immediate impact on the country's sovereign credit rating of BB-, three steps below investment grade. To contact the reporter on this story: Aleksandra Nenadovic in Belgrade through the Prague newsroom at [Е-ПОШТА ЗАШТИЋЕНА] . Last Updated: January 29, 2008 10:52 EST
