Foreign debt and reserve grow fast

Romania’s gross international reserves went up faster than the medium and long-term foreign debt last year, although the latter was higher than initially anticipated. At the same time, the coverage of imports by the official reserve (gold and foreign currency) managed by NBR rose to 4.7 import months, compared with 3.5 months in 2001.
The improvement of Romania’s international investment position was one of the first things the American financial rating agency Standard & Poor’s had in mind when recently upgrading its sovereign rating from B plus to BB minus.
The medium and long-term foreign debt had gone beyond $15bn by the end of 2002, up 26.5% from the previous year. Besides the $2.1bn net capital inflows, the increase in the debt level was caused by the unfavourable foreign exchange rate gaps of more than $1bn.
Gross international reserves went up 31.5% last year, reaching $8.3bn, while the banks’ foreign currency reserves shed $433 million. Subsequently, the increase in the reserves was solely due to the $2.4bn increase in NBR’s reserve assets.
The foreign currency reserve managed by the central bank rose by $2.2bn due to NBR’s purchases of foreign currency, the foreign loans-derived inflows (as part of the PSAL II agreement with the World Bank), as well as to the sales of foreign currency bonds issued by the Finance Ministry. NBR bought $1.7bn from the domestic forex market last year, but the high volume of foreign currency inflows prevented the ROL from losing any more than 6% to the USD.
At the same time, the foreign currency reserve also collected $943 million from the bonds issued by the Finance Ministry, $637 million of which from the ten-year eurobond issue and $306 million from the one-year USD-denominated bonds released on the domestic market. Foreign loans-derived inflows added another $276.6 million to the reserve. The foreign currency reserve went up even though the payments of the foreign debt reached $1.5bn, in addition to the $426 million payments made by the Finance Ministry for the foreign currency bond issues that fell due.