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Analysis: Banks will use money from RMO reduction for new loan club or foreign exchange bonds

By bringing out into the market 1-1.5 billion euro after reduction of RMO for foreign exchange passives from 30% to 25% will cover a part of the necessary amount meant to finance the budget deficit through new Finance Ministry state bond issues or a new loan club, analysts questioned by NewsIn say.

"In the conditions in which the Finance Ministry continues to pay only 10% (for state bonds) financing the budget deficit becomes practically impossible. The money will be used either for new state bond issues in the domestic market or a loan club, about which we have spoken of late," said Nicolae Chidesciuc, the senior economist of ING Bank Romania who estimates that the central bank left in the market about 1-1.2 billion euro following the Monday decision.

He estimates that the state's financing needs until the end of the year will be 12-15 billion lei (3-3.5 billion euro) in the conditions in which it was 19-20 billion lei at the end of October. In the meantime, the Finance Ministry issued state bonds in foreign exchange of 794 million euro, with a three year maturity.

In these conditions Chidesciuc considers that the Ministry of Public Finance will be forced to accept profits higher than 10% for state bond issues."It is hard to issue state bonds and a loan club of 2-3 billion euro, so that it could cover financing needs, considering the high country risk. An important part is left which can be covered only by profits over 10% for bonds in lei," Chidesciuc commented. Secretary of state Bogdan Dragoi declared last week that the Finance Ministry would not accept profits over 10% for bonds in lei made until the end of 2009.

In the first 10 months of the year, state bonds of 58 billion lei (about 13.7 billion euro) were issued, about 5 times more than in 2008. The Finance Ministry won about 1.2 billion lei in the first four tenders."Considering the budget deficit in the last 9 months, what will reach maturity in this period, what they won by the issue of state bonds in foreign exchange in the domestic market and the money existing in the Treasury the net financing need is 6 billion lei for the last two months of 2009," Dumitru said.

He estimates that the National Bank of Romania (BNR) issued 1.5 billion euro by the reduction of the lowest compulsory reserves for passives sold in foreign exchange from 30% to 25% and says the financing need will be almost covered through the issue of state bonds in foreign exchange or a new loan club.

"We have anticipated this reduction since the monetary policy session, but it has become clear that the third installment from IMF will be postponed and in the perspective of budget deficit anticipation, we made this decision," Dumitru added.In July the Finance Ministry borrowed about 1 billion euro from Romanian banks through a loan club arrangement to finance the budget deficit, According to the calendar announced previously, the next meeting of the Administration Board of BNR devoted to monetary policy will be held on 5 January 2010.

Sursa: http://www.actmedia.eu/

Tags: billion deficit ministry state about financing budget finance foreign reduction money exchange bonds euro bnr ing

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