The National Bank of Romania made net purchases of 629 million euros from the forex market in July, the highest amount recorded in the past fourteen years.
The purchases are very significant, pointing to the high level of foreign currency surplus existent on the market. If the National Bank had not bought this surplus, the ROL/EUR and ROL/USD exchange rate would have posted a significant drop. For instance, one euro would be worth some 35,000 ROL instead of the current 41,000, whereas the exchange rate for the US dollar would dive to 29,000 ROL.
However, the acquisition of a surplus of this size does entail some particularly high costs. Whatever the National Bank (NBR) manages to gain from its foreign currency transactions, it loses when it purges the market, as it has to immediately absorb the surplus ROL that enters onto the market as the foreign currency is exchanged into the domestic currency. At the end of June, the stock of deposits attracted by the NBR from the banks amounted to 85,748 billion ROL (2.1 billion euros) for which it paid an average annual interest rate of 21.01%. Early this year, the deposits attracted by the National Bank were worth some 65,219 billion ROL (1.59 billion euros). On the one hand, there is a surplus of foreign currency on the market, but there is also a surplus of ROL, which points to the anomalies existent in the economy.
In July, the currency reserve went up 852 million euros, following certain operations: net purchases of 629 million euros, inflows worth 207 million euros as part of the PSAL and SAPARD programmes, revenues derived from the management of the international reserve (18 million euros), and other net inflows, accounting for 89 million euros. At the same time, payments have been made amounting to 91.5 million euros, related to the foreign public debt.
Following these operations, the currency reserve was worth 8.6 billion euros at the end of July, up 2.2 billion euros.
The gold reserve remained at 105.1 tonnes, or the equivalent of 1.09 billion euros. More than half of the gold reserve is abroad, having been deposited at the Bank of England.
The international reserve (foreign currency plus gold) has reached 9.7 billion euros. By the end of the year, payments in the account of the foreign public debt will have amounted to 516 million euros.
Foreign currency inflows have exceeded all expectations and were pushed up mainly by the money sent back home by Romanians working abroad; by short and long-term loans; and by investments.
Moreover, the trade deficit has also gone up, to about three billion euros by the end of the first half of 2004. NBR is not worried by the trade deficit increase, given that the foreign currency inflows can cover the deficit financing.
The high foreign currency surplus has also helped the exchange rate. From the beginning of the year, the euro has dropped 103 ROL (0.2%), while the US dollar went up 4.7% (1,533 ROL). No spectacular exchange rate trends are forecast for the remaining months of 2004, unless something major happens on the international markets.
liviu.chiru@zf.ro
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