BNR - the big loser in IMF agreement deal

The big loser in the loan agreement concluded with a number of international institutions under the IMF's monitoring is the Central Bank. Even if the giant loan is not repaid by the Central Bank, but by the Romanian tax-payer, it remains the big loser as the reference is made based on the situation that has existed so far. So far, BNR has been a forceful institution in the Romanian society and economy and the Romanian tax-payer has always been a constant loser, always paying the bill (run up by no matter whom) and always being the number one fool in respect of what he gave to and what he got in return from the state.

With this mammoth foreign loan, the Central Bank loses two crucial things. First of all, it loses the main legal instrument it had on its hands to be able to keep the banking system under some control: the minimum reserves commercial banks were made keep with the Central Bank. At the end of the day, the loan agreement with the IMF is so conceived that BNR is supposed to free up some of the amounts kept on reserve and put it to the disposal of foreign commercial banks. It is not by chance that the actual amount of the loan taken out with the IMF is an exact match on the amount in the minimum reserves, and the foreign currency entries from the IMF will replace the sums of the minimum reserves in the Central Bank's operations designed to defend the RON. BNR is pointlessly claiming that it will release the reserves gradually, only in small tranches, and only if it sees that such money stays in the Romanian economy! Let us be serious! The agreement with the IMF is made in such a way as to take those amounts out of the safe boxes of BNR and this is what is going to happen, no matter if the money remains and help banks resume lending activities (as political statements keep claiming) or if it is returned to parent banks abroad that, under the current conditions of international liquidity shortage, are hungry for the last penny. Any gentlemen's agreements on that are mere pieces of paper as far as privately-owned banks are concerned, as they are capable of finding dozens of ways to conceal any money remittance abroad avoiding liability for directly infringing on any existing agreements.

The Central Bank will turn out to be a fool! BNR will end up without its main tool through which it has more or less kept the ravaging foreign banks under control. BNR has been unable to control foreign banks by the interest rate. The more BNR was trying to limit credit by raising interest, the more money the foreign banks were bringing laughing in its face. Kept at a high level, the minimum reserves for owned funds in foreign currencies have been the main lever permitting BNR to brake reckless lending artificially creating demand on the Romanian market and thus disproportionately boosting import, completely disarticulating the economy and exacerbating the foreign deficit. All these weaknesses are now being incriminated by the very ones that generated them. All the shortcomings that are now being used to downgrade Romania's ratings have been also used as arguments to put it back into the hands of the IMF. Without large minimum reserves - a practice that has always been denounced by the envoys of most foreign banks to Romania! - the current situation in this country would have been even more difficult!

But, from now on, foreign banks in Romania can disregard the Central Bank completely. They have won the battle and are now free to start the big rip-off of the Romanian economy. Pardon me, of what's left of it! Another, perhaps even more important thing the Central Bank is losing from the foreign loan agreement is its condition in the Romanian society. The loss of its controls over banks (practically all foreign) in this country can only lead to an actual weaker position and image of the institution in the Romanian society. One should candidly admit that BNR has been the architect of the Romanian economy and society bad or good as they may be, for the last 20 years. It was a fact the society has been fully aware of even if some were not always ready to admit it. BNR and its opinions have always been benchmarks, enjoying a much greater credibility than any government would have ever had.

From now on, the situation will be different. The IMF will take BNR's place regarding the relaxation of the minimum reserves, forex trading on the market, interest levels or the monetary policy. Even the major objective of BNR - pegging to the Euro in a few years' time - will become the IMF's task, as it will anyway rule the country in the meantime. The predators have immediately sensed BNR's loss of stature: PSD barons, one of the most sinister post-revolutionary casts, have already urged - as announced by….who else than Mr. Hrebenciuc - a parliamentary control on the way in which BNR would spend the money coming from the IMF. Imagine that! Death comes with disgrace.

Nine O'Clock