The country’s currency reserves are growing. BNR does not intervene to support the course. If the National Bank intervenes, it does so in order to avoid an increase in the exchange rate, said Eugene Redulescu, director of the Financial Stability Office of the BNR, clarifying that he is making statements as an economist and financial analyst.

Evgeny RadulescuPhoto: Inquam Photos / George Călin

“We still have an increase in foreign exchange reserves. This indicates that there is an inflow of foreign currency, some unaccounted for, all repatriated. Newer, more through the banking system. It is also repatriated through currency exchange offices. And here we have quite significant surpluses. This money ends up in banks,” he said during the ZF conference.

This means aggregate supply.

“Important sums coming from the EU also play a role. These resources lead to a trade deficit. Otherwise, if you don’t use them to import, it means you’re increasing your reserves. You can’t do something like that,” Redulescu said.

  • “Also, we have amounts coming through PNRR. Part of the corresponding sums is in an account with the BNR. You can’t use them, but they are there. It also builds confidence. It is true that we have one of the highest interest rates on loans in the countries of Central Europe. Only the Hungarians surpass us.”

“This is because although they have a better rating than Romania, they have a worse situation in terms of attracting funds from the EU,” explained Eugene Redulescu.

Romania’s problem: the government deficit, which can be seen in the trade deficit

“Our biggest problem preventing us from reducing the trade deficit is the government deficit,” he said.

The deficit of the state budget, says Redulescu, correlates with the external deficit 1 to 1.

“When you have a 6-7-8% government deficit, you can’t expect a current account deficit of less than 6-7-8% unless you have an efficient enough economy to produce more,” the economist said.

According to him, the probability that the macroeconomic policy, in addition to balancing the budget, will lead to a reduction in the trade deficit is quite illusory.