Isarescu says 5.9 pc deficit reasonable

A budget with a deficit of 5.9 per cent of GDP is reasonable in the current context, being a centrepiece of the program with the IMF and the European Commission, Mugur Isarescu, the Governor of the National Bank of Romania, stated last Friday. 'A budget with a deficit of 5.9 per cent of GDP cannot be welcomed by a central bank. We consider it reasonable in the current context and a centrepiece of the program with the IMF and the EC... so we welcome it,' Isarescu told a press conference on Friday, Mediafax reports.

According to Fabienne Ilzkovitz, the representative of the European Commission's mission to Romania, the EC could extend to 2012 the deadline it has set in order for the countries with excessive deficits, Romania included, to bring those deficits down to within the 3 per cent of GDP threshold. She pointed out that this issue is still being discussed in Brussels, with a decision set to be taken during the European Council's February meeting.

In other developments, the crediting process will gradually resume in the following period but will not be generalized, with significant differences set to exist between banks, the BNR governor added. He opined that some banks will mostly remain with activities on financial markets and could even specialize on such operations. The BNR Governor believes that the resumption of crediting will not put significant pressures on the inflation rate's evolution.

The monetary policy measures seek to take cautious and relatively small steps in order to see how they are absorbed by the market, BNR Governor Mugur Isarescu stated during a press conference, pointing out that BNR cannot regulate the banks' treasury fluxes on the basis of 'their sentiments.' He also explained that despite the fact that it wants to encourage crediting denominated in the national currency the Central Bank cannot reduce the minimum reserves for RON-denominated passive assets because there is already an excess of liquidity on the market. The Governor pointed out that most of the banks kept waiting for the RON's depreciation and eventually became bored.

Isarescu pointed out that the Central Bank has slightly changed its speech by replacing 'the firm management of liquidity' with 'the adequate management of liquidity.' He considers that the current level of the interest rate is adequate for the economic and monetary conditions and pointed out that BNR also notes the delay with which the commercial banks' interest rates are dropping.

BNR also announced its complete timetable of meetings in 2010, with monetary policy decisions scheduled on March 29, May 4, June 30, August 4, September 29 and November 2. At the same time the Central Bank also announced the dates of its first two meetings in 2011 - January 5 and February 2.

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