The foreign currency reserve of the National Bank lost another almost 800 million euros in March, decreasing to 25.12 billion euros.
This was the fifth month of decline in a row, during which time the reserve went down by more than two billion euros, from the all-time peak of 27.3 billion euros in October last year.
The decline of reserves reflects NBR’s efforts to mitigate the decline of the RON, by selling foreign currency on the interbank market, analysts say. In March, the weakening of the dollar and of the pound sterling against the euro led to a reduction of the book value of the foreign reserve by 422 million euros, NBR officials say.
The March decline is one of the most powerful of the last four years, second only to that in December 2008, when more than one billion euros trickled out of NBR’s reserve. The decline in February had stood at merely 92 million euros. In December, the NBR had to purge the high amount of RON thrown on the market as a result of the expenses of the Finance Ministry at the end of last year, in order to contain exchange rate weakening pressures.
NBR Governor Mugur Isarescu, who was invited to appear before Parliament for an update on the economic situation, stated at the end of the meeting that the foreign financing agreement concluded last week was "not only necessary at this time but also a good one." As a result of the agreement, NBR will get 12.95 billion euros to add to its foreign reserve, coming from a loan provided by the International Monetary Fund.
NBR explains part of the decline of the foreign currency reserve in March by pointing to the fluctuations of the dollar and pound sterling against the euro.
"The decline of reserves on March 31, 2009 compared with February 28, 2009 was largely the outcome of the trend of the euro against the US dollar and the pound sterling in the aforementioned period. The foreign reserves of the National Bank of Romania consist of euro-denominated assets (65%), US dollars (27.5%), pounds sterling (7%) and other currencies (0.5%)," NBR says.
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