Not For The Budget Deficit, IMF Money Will Feed Forex Reserve

A possible loan from the International Monetary Fund will be used to increase the foreign exchange reserve of the National Bank in order to protect the foreign balance, and not to finance the budget deficit, National Bank of Romania (BNR) Chief Economist Valentin Lazea explained yesterday.

In his opinion, the advantages of a loan from the IMF would include additional cash to the international reserves, improved confidence among foreign investors and strengthened will to make political reform. "We are not talking about one loan, but a package of loans from various institutions, maturing in approximately two years," he said. In the end, signing or not signing a financing agreement will be a political decision, Lazea stressed.

The money from the European Bank for Reconstruction and Development or the European Investment Bank could be used to finance investments in infrastructure or similar, while the money that could be taken from the European Commission would have a destination subsequently decided, Lazea said. "This is a proactive approach of the authorities. We are not starting talks with these international institutions because we have a problem, but because we want to prevent it," he added.

Romania needs a loan to protect the foreign exchange reserves, but also to finance a possible decrease in the minimum mandatory reserves for forex-denominated liabilities. However, Lazea stressed that BNR would only reduce the mandatory reserves and thereby relax the monetary policy after a notable consolidation of the fiscal policy.