Currency devaluation in Croatia negatively impacts the banking sector's performance. It makes imports more expensive and exports cheaper, leading to decreased investor confidence and lower returns on exports. This can result in lower deposits in the domestic currency and overall economic instability. To avoid these negative effects, countries should focus on increasing exports through alternative strategies rather than devaluing their currency. If devaluation is necessary for monetary policy, raising short-term interest rates can help strengthen the currency and attract investors.