The National Bank of Romania will give „little by little” more flexibility to the exchange rate as the domestic political tension diminishes and capital begins to enter, Governor of the National Bank of Romania (BNR) Mugur Isarescu said on Monday.
In his opinion, at this moment „it is not the case to depreciate the exchange rate.”
„Let’s wait and see what the market tells us. But before I said one more thing, at the moment, it is not the case to depreciate the exchange rate, because we have a lot of tensions and we do it without unbalancing things too much. You see that the reserve increased by about 10 billion until the summer of 2024, then it decreased by about 9 billion, it will increase again at the end of the month, when the figure will appear, because 4 billion from foreign loans have come in. So, we do things the right way. I don’t know what will happen to the course either. The market will determine, but little by little we will give more flexibility, as the internal political tension decreases, things begin to return to normal and confidence is restored. We will leave more flexibility to the exchange rate, because a lot of capital comes in. „You should know that last year, before summer, we tried not to appreciate the exchange rate, because when you have such a large trade deficit it is not good to appreciate the exchange rate,” Isarescu told a conference where he released BNR’s Inflation Report.
He admitted that there is a possibility that, this year, the exchange rate for one euro „jumps” from one to RON 5.
„It’s no longer a secret; the budget was built on a rate of over 5. It’s possible to happen, right? The budget is built on data made by a government forecasting authority. I, rather, would de-escalate the discussions related to exceeding the level of 5. I’ve read so many things that sometimes I’ve been scared of the way in which this can be thought of. Well, from 4.97 to 5 is less than 1%. 5 bani is 1%, here there are only 3 bani. So it will be a pity, for example, that the price of telephony will increase, that is, instead of 100 lei – let’s give a figure – the monthly subscription will be 101 lei, so the price will increase by one RON. And that will have a great impact,” Isarescu said.
He added that BNR’s interventions in the market were as an intermediary between it and the Ministry of Finance.
„We stuck to the exchange rate and set it, although we have a policy of floating, because there was war, pandemic, then this war got closer to us and we were also blown away with an energy crisis that pushed prices up everywhere. So, we have not kept it a secret that we are doing that, but our policy is one of flotation. What did we achieve? Well, we managed to have the exchange rate still determined by the market. You haven’t heard a single complaint from the market that someone hasn’t taken their money for what’s in the market. How did I do it? This is the art of our Market Operations Department and we congratulate it. Did we step in into the market? We did but, as I said before, we intervened as intermediaries between the Ministry of Finance and the market. The Ministry of Finance, instead of selling the funds from foreign loans, from European money, directly to the market, they keep them with the National Bank and, when they need them, they ask the National Bank to sell part of these funds. They are not small. Why are we intermediaries? Because, despite the critical position of the governor, of some of my colleagues, we consider that selling directly in a market, which is not very deep, selling a billion euros in a single day, because you move the exchange rate as much as it does in the countries with which we compare ourselves (Hungary, Poland, the Czech Republic), you move the exchange rate by 20 bani. The trend in Romania is: when it appreciates it is an accident, when it depreciates it is drama. And that’s it, we don’t have too many business indicators to cling to, to create credibility in Romania. Maybe it’s not the best. Maybe we should have had a Dow Jones, a stock market index or something, but for now we have the exchange rate,” said Isarescu.
AGERPRES
