Loading ...National Bank of Romania (BNR) governor Mugur Isarescu said on Wednesday that chances are that Romania might sign a new stand-by agreement with the IMF, but this is not exclusively for BNR to decide. 'We do not rule out a loan from the International Monetary Fund, as the Government also said. The central bank is considering a package also including European amounts, of course.
Money for projects, from the European Investment Bank, for example. Such package may also include financing from the Fund, but this would be meant to protect the forex reserve,' said the BNR governor presenting a statistical analysis of macroeconomic developments authored by BNR experts. The governor said that if Romania ends up seeking foreign financial support, it would be premature to advance a specific amount and that the country's need for financing this year is hard to estimate at this moment.
Speaking about the budget deficit which is now wider than 5 pct of the GDP and which, according to projections, is supposed to narrow to 2 pct of the GDP this year, Mugur Isarescu said that "the budget deficit can be financed from domestic resources' and that 'in the last three months, financing the budget deficit was indeed an accomplished mission, yet not without liquidity in excess.' "The amount of government stock doubled in this period to RON 25 bln,' said Isarescu.
The central bank governor cautioned that BNR alone cannot offset macroeconomic imbalances, underscoring that an adequate governmental policy is also necessary to reduce Romania's current account deficit, which was running at EUR 16.8 bln at the end of 2008. The exchange rate policy, Isarescu reminded, needs to be correlated with a set of other economic indicators, and should be accompanied by a tight control on the inflationist phenomenon.
"Like any central bank that targets inflation, we do not target the exchange rate, nor are we exclusively interested in it, but this does not mean that we do not keep an eye on it. We pursue sustainability. Even if we are a Central Bank, we also look at the exchange rate,' explained Isarescu. The BNR governor dismissed allegations that the Romanian banking system would be sliding into payment incapacity and that there would be a request for immediate reimbursement of foreign loans raised by local branches of foreign commercial banks.
Mugur Isarescu remarked that the exposure to the danger of the deepening financing deficit is highest for the private non-banking sector. 'For non-banking financial companies and leasing companies the possibility to refinance foreign credit lines stands at 64 pct,' said the governor. "It's rather the private non-banking sector that runs chances to see a balance gap,' he explained, citing the example of the leasing companies, which have minimum chances to see refinancing resume.
"On Dec. 31, 2008 the foreign public debt of the governmental sector was EUR 10.7 bln and interest rates plus installments totaled EUR 1.6 bln euros. The financing needs might go as high as EUR 4 bln. The foreign debt of the Romanian private sector is EUR 40 bln and interest rates plus installments could reach a combined EUR 9.6 bln in 2009," said Isarescu.
The BNR governor pointed the finger at the rating agencies which – he said – take hasty decisions, terming their move to lower Romania's sovereign rating as 'biased' and grounded on the inaccurate assumption that there would be a wave of simultaneous money withdrawal actions from banks, but assured that this is out of question.
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