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Isaerescu: Exchange rate of 14 days ago reflects macroeconomic basics
The level of the exchange rate registered two weeks ago seems to reflect macroeconomic basics , BNR governor Mugur Isarescu said, pointing out that the interventions of the central bank do not have in view a fixed parity.“As for Romania, our presence in the market does not have in view the exchange rate alone. In a way, the events of a few weeks ago of an exchange rate of over 4.3 leieuro show that. We do not focus on this fixed point, we have areas in which we consider the rate in a relative balance at that moment,” Isarescu said.
He mentioned that economy evolves, which means that data change, and a balance area in a year is not maintained indefinitely.“We do not have fixed points because that would mean mayhem,” Isarescu said.
Asked if the present parity reflects macroeconomic basics, Isarescu answered that “we were almost there.”However, he said he did not know what “now” meant.
At the end of June the leu depreciated significantly against euro, when the Constitutional Court declared the reduction of pensions unconstitutional, which deepened uncertainties about Romania’s economic situation. In the last three June sessions, the exchange rate reached maximum levels, reaching a peak of 4.3688 leieuro on June 30.\Previously, at the beginning of the year, the exchange rate fluctuated between 4.1 leieuro and 4.3 leieuro.
Foreign exchange reserve, element of credibility
Governor of the National Bank Mugur Isarescu on Thursday mentioned again the role of the country's foreign exchange reserve as an element of credibility on foreign markets. Isarescu said once more that in the 90s the National Bank had problems with the level of its international reserve, but after 2000 this reserve increased tremendously.There were also time spans when things were flat and this is not bad as regards the evolution of the reserve of the National Bank of Romania (BNR), said the Governor.
'One of the goals I myself aim at is to show that the perception according to which the international reserve must grow incessantly is not correct. The growth of the gold reserve, for instance, stopped at 103 tonnes in the past ten years,' said the Governor. He added that Romania's international foreign exchange reserve had 'a structure that is stable enough, which is also given by the structure of the foreign trade.'
The structure of the BNR international reserve reveals a 63 percent share with euros, 32 percent with dollars and the remaining part with other currencies.The Governor remarked the behaviour of banks starting in 2009, when the saving level began to increase.'What was important for the times of crisis is the fact that in 2009 banks felt it necessary to set more currency aside,' said the Governor.According to BNR, in late June Romania's international reserves (currencies and gold) were 34.999 billion euros, 0.71 percent less than 35.251 billion euros on May 31, 2010.
The gold reserve stood at 103.7 tonnes and, given the evolution of international prices, its value was 3.372 billion euros. The Governor attended a seminar on 'Romania's International Reserves: Sources and Destinations,' organized by Finmedia.
BNR's role is not to pay wages and pensions
Governor of the National Bank of Romania (BNR) Mugur Isarescu on Wednesday sent a message to politicians that 'BNR cannot pay public pensions and wages out of its reserves.''The National Bank cannot directly finance the cash deficit. BNR cannot cover the costs of the public administration, even if they are current, for instance to pay public wages and pensions or capital expenditure,' said Isarescu.
He added that there are clear restrictions on the use of the national reserves set up under the treaties Romania has signed with the European Union.
'A minimum of budgetary discipline is required. The political parties should hire a juridical adviser or a financial adviser or a math adviser. They must understand that they cannot build budgets which spending is higher than revenues and higher than what the Government can borrow,' Isarescu warned. He explained that the deficit of the social security fund is 3 billion euros a year, which equals Romania's total gold reserve.'BNR cannot finance this deficit. We could only cover a one-year deficit, and then what?' said Isarescu.