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Euro sells for more than 4 lei in interbanking market

The Romanian currency leu depreciated to the euro in the interbanking market on Monday, with the single currency selling for more than 4 lei.

The National Bank of Romania (BNR) announced on Wednesday, Dec. 24 the exchange rate of the euro at 3.9649 lei, up by 3.52 bani (0.89 percent) from Tuesday, when the exchange rate was 3.9297 lei to the euro.

The euro-to-the-leu exchange rate might stabilise only by a very credible message about the budget policies and public revenues, Raiffeisen Bank chief economist Ionut Dumitru has recently told Agerpres.

He explained the rate of exchange is linked to the investors' confidence and it will be very difficult to maintain if Romania doesn't regain such confidence.

'We cannot hope to see the depreciation halting if we do nothing as far as the budget is concerned. This is impossible without help from the fiscal-budgetary policies, no matter how hard the BNR tries. The rate of exchange is given by two flows - the commercial flow and the capital flow. The commercial flows create depreciation, as the imports are higher than exports, while the capital flows that had used to flow in cancelled the depreciation pressure contained in the commercial flows. Now the capital flows are no longer as they were before and no longer counterbalance the leu's depreciation and the BNR, therefore, should be helped', Dumitru said.

The Raiffeisen Bank chief economist argues the Finance Ministry should find ways to dramatically cut the budget expenditure and try to increase the revenues in order to prevent a major budget slippage that might loom if corrective action is not taken.

'We risk seeing a very large budget deficit in 2009. It would be a very bad signal to investors and the credit rating agencies,' Dumitru stressed.

According to him, a new agreement with the International Monetary Fund (IMF) would give Romania the credibility it needs in front of the investors, but it would attract tough conditions such as budget austerity, narrowed budget gap and even higher taxes.

 

Sursa: http://www.rompress.ro

Tags: flows budget exchange euro bnr