Many people have been asking whether the changes to the Pula exchange rate arrangement last week entailed a devaluation of the Pula. The answer is, rather unhelpfully, yes and no. There has been no formal devaluation. But the widening of the BoB’s bid-offer spread from 1% to 15% means that for importers, there is a de facto 7% devaluation, which will lead to a sharp rise in inflation. But it has also led to a de facto 7% revaluation for exporters and investors. This contrasts with the normal impact of a devaluation, which would improve the competitiveness of exporters. The change has therefore achieved the worst of both worlds – all of the costs of a devaluation and none of the benefits. The impact of the move really was not thought through beforehand. Time to reconsider and hopefully reverse last week’s changes.