The Croatian National Bank purchased from the Ministry of Finance 315 million dollars - a part of privatization revenues realized through the sale of a share in Croatian telecommunications company (Hrvatske telekomunikacije) to Deutsche Telekom. Due to this transaction, international reserves kept with the Croatian central bank reached the highest level recorded so far - USD 3.16 billion.

Since the domestic curency equivalent of the value of this transaction amounts to HRK 2.24 billion - the amount was transferred to the account of the Finance Ministry and will be used for paying immediate liabilities of the government budget (300 million kuna have already been utilized for repaying the debt of the government budget to the central bank), the level of banking system liquidity is momentarily and temporarily significantly increased.

Consequently, the central bank has already undertaken measures to withdraw the surplus of liquidity from the system: already on Friday, October 8, 1999 an additional auction of domestic currency denominated CNB bills was held with the following results: the value of CNB bills (with 40-, 96- and 187-day maturity) subscribed by banks totalled HRK 399 million. Due to the auction, the total amount of subscribed CNB bills reached HRK 1.31 billion.

Regular CNB bills auctions will be held in the coming days, and should it be necessary, the central bank will intervene in the foreign exchange market. The Croatian National Bank estimates that despite the exceptional proportions of the financial transaction mentioned in the introductory paragraph, the instruments of monetary policy utilized so far will suffice to maintain, without special difficulties, the adequate level of kuna liquidity in the banking system, as well as to maintain such relation between supply and demand on the foreign exchange market which will ensure further maintenance of the stability of the kuna exchange rate.