NBR reserves down second month in a row

The National Bank of Romania (NBR) in December 2003 logged a new substantial decline in its foreign currency reserves for the second month in a row. The reserves shrank by 228 million euros to 6.39bn euros at the end of last year.

The officials of the bank blamed the visible drop in reserves in the last month of 2003 on the sales of foreign currency (67.5 million euros) on the interbank market, the payments on the foreign debt and the transfers to the State’s foreign currency reserve.

Whereas the central bank successfully boosted its foreign reserves by approximately 2bn euros in 2002, the growth pace last year was cut down to one quarter, as the gain logged in 2003 amounted to only 505 million euros. Last year’s NBR reserve growth, a mere 8.5%, is not enough for a year when imports witnessed a spectacular trend, progressing by about 14%.

After a modest progress in the first quarter of 2003 and a severe decline in April and May, when NBR was faced with a prolonged foreign currency shortage on the domestic market, reserves were 600 million euro lower at the end of May compared with December 2002.

The 700 million euro bond issue and the purchases of foreign currency from the interbank market during the summer months partly rebuilt NBR’s reserves, which peaked at 6.9bn euros.

As of November, however, when the euro started jumping from peak to peak compared to the USD, NBR embraced a net foreign currency seller position on the interbank market. Net outflows in the last couple of months in 2003 were in excess of 200 million euros.

The foreign currency reserves could go up even slower in 2004 than last year, because the funding of the increasing trade deficit will bring along additional costs for the central bank to bear. oana.nuta@zf.ro