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Isarescu: In Romania, the initial economic impact of the pandemics was a very strong one
‘The initial economic impact of the pandemics was a very strong one in Romania, emphasising the existing imbalances, the pressures regarding the depreciation of the national currency and the growth of the necessary of liquidity, states Mugur Isarescu, the governor of the National Bank of Romania (BNR) in the opening of the conference organised by the National Bank of the Republic of Moldova with the theme ‘ The role of a central bank in the modernisation of the society – challenges in emerging economies’.
‘In Romania the initial economic impact of the pandemics was a very strong one, focusing on the existing imbalances, the pressure regarding the depreciation of the national currency and the growth of the necessary of liquidity. As a consequence, the immediate objective of our central bank was to keep stability and liquidity of the banking system, for the good functioning of the public finances and real economy; at the same time, the measures taken were meant to avoid the excessive depreciation of the leu. For a larger horizon, we followed to keep trust that the economic and financial balance are kept under control. In this sense and in complete concordance with its mandate and its independence ,BNR adopted a package of proportional and efficient measures for the support of the Romanian economy. Given the exceptional character of the pandemics,BNR better collaborated with the government of Romania, especially with the ministry of finances, to avoid a possible conflict between the monetary, macroprudential measures and the fiscal ones’ Isarescu stated.
The BNR board decided to reduce gradually the rate of monetary policy interest, the narrowing of the symmetric corridor made by the rate of permanent facilities interest around the rate of monetary policy interest, the supply of liquidity to lending institutions by means of repo operations (reversible operations with bonds) with a view to ensuring the functioning the monetary market and other segments of the financial market, the reduction of the rate of compulsory minimum reserve for the liabilities in foreign currency for the lending institutions, as well as the purchase of bonds in lei on the secondary market with a view to consolidating the structural liquidity from the banking system to contribute to the financing of the real economy and public sector in good conditions.
In the whole world, both governments and central banks intervened to address the negative impact determined by the pandemics through social, economic, fiscal and monetary policies.’
‘This complex support, unprecedented, showed that in such situations the mobilisation of the authorities – especially of the monetary and fiscal ones – is essential for the good functioning of the markets, of the economic and social mechanisms’ he added.
The BNR governor restated the importance of the independence of the central banks and the commitment to the fundamental objective with all responsibility.
‘The independence of the central bank is no isolation in an ebony tower but an active legal cooperation with the fiscal authority, with the government. I don’t think, from my experience, that there is a better alternative for a balanced mix, coherent, of fiscal and monetary policies. And the independence of the central bank means the accountability to the law, of the mandate, of the society. Or, to use Costache Negruzzi’s words, the central bank must ‘be accountable’ for what they do.Affecting the independence of the central bank in favour of political decisions aiming at short term electoral gain, the real costs will be supported at economic and social level, by the whole country on a long term’ Mugur Isarescu says.
A study recently published by the European Central Bank with the theme ‘ The Case for Central Bank Independence’ shows the fact that, although the independence by law (de jure) has been kept intact, the independence de facto worsened in almost half of the central banks under observation.