The introduction of the hard ROL, namely slashing zeros off the domestic currency’s tail, cannot be avoided, but the National Bank of Romania has made no decision as to the exact time when this move is to take place.
“Denomination cannot be avoided and it is very likely to take place. We cannot rob this phenomenon of its importance, especially since the media has run stories on this issue and people started asking questions. I would like to point out that we are not talking about any NBR decision in this sense, because the central bank has not made any such decision,” the NBR Governor said yesterday, during his first public statement on this issue.
The Governor cared to state that “experience shows that denomination does not necessarily have to take place when inflation reaches 10%, but rather when there is a certain disinflationist trend, so that demonetisation contributes to increased confidence in the domestic currency and, implicitly, to lower inflation.
This is a decision carrying political implications, which means that the Government must be consulted and Parliament must become involved in the legislative aspect. We should no longer refer to money reform under this context.
People must understand that denomination does not mean confiscation. No one will lose any monetary unit, on the contrary, everything will take place just like in the case of bill changing,” Governor Mugur Isarescu maintained.
According to the NBR Governor, the shift to the “hard ROL” is a process taking between 12 and 16 months, while such a decision cannot be made during an electoral year such as 2004, or in 2005-2006, when Romania expects to be very close to European Union joining.
Isarescu says that, if the accession horizon becomes visible in 2005-2006, instead of the year 2007 that was considered in Romania’s development strategy, it is possible that denomination may no longer be applied.
This aspect was immediately speculated by the bankers attending the seminar, who said there was a long way before Romania could join the European Union and the Monetary Union, and that the hard ROL should be applied as soon as possible.
“I have noticed your concern for the public opinion, as you want to protect it and not send any strong signals that may perturb the situation. However, I believe that the ROL denomination should be done as soon as possible, because I estimate we will not be joining the Monetary Union before 2011-2012, when we will really shift to the euro,” said Eugen Radulescu, president of Banca Agricola-Raiffeisenbank.