Economic Policies on March 15–28, 2004

Banking and insurance

Monetary and credit policy

On March 26, 2004 National Bank Council of Administration decided to keep interest levels at the level set back in December 2003. National Bank officials claim the decision took into account the evolution of macroeconomic indicators, inflation rate, and monetary indicators.

Also, the basic annualised interest rate was set at 14% and is to be applied for refinancing of commercial banks via REPO operations of buying state securities and T-bills for a two month period. Interest rate on lombard facility, overnight credits and commercial bank’s deposits attracted by National Banks were kept steady at 16%, 17% and 3% respectively. Interest rate on long-term credits (over five years) reached 11.5%.

Banking sector

In 2004 acquisition of foreign currency in cash from the population has exceeded by far the amount of sale. In January commercial banks bought 24.7 million USD more in cash than in December 2003. In February the difference reached 30.3 million USD. Also in January financial and banking institutions bought 9.3 million Euro, whereas in February only 6.6 million Euro. Throughout 2003 banks gained 302 million USD and 103 million Euro as a result of difference in buying and selling rates and there is evidence that the gains would further grow. National Bank seeking to fill its foreign currency reserves, accounts for about 1/5 of foreign currency buying operations. At the beginning of the year net foreign currency reserves amounted 159.83 million USD, whereas at the end of February they reached 176.69 million USD. Gross foreign currency reserves are estimated at 310.91 million USD and cover for 2.2–2.3 month import. Such a surge in National Bank’s assets has led to a considerable increase in M0 money supply. Based on the evolution of the main monetary indicators one may assume that by the end of first quarter National Bank’s foreign currency reserves would reach 320 million USD.

Trade

Trade policies

In 2003 amount of goods manufactured in free economic zones rose 1.5 over last year. Moreover, 75% of it was exported. Last year residents of free economic zones transferred 64.9 million Lei to the state budget. Free Economic Zones proved to be an efficient mechanism of the investment policies pursued by the state. Decision-makers at the Ministry of Economy say those zones play an important role in the economy of the regions. For instance “Valcanes” transferred 5.6 million Lei to the state budget, i.e. 48% of the rayon budget revenues. A similar situation is in Taraclia with “Tvardita” being one of the main sources of revenues. Net investments placed in that region last year reached 51.3 million USD.

Business environment

Privatisation

Government announced a new tender for its 99.97% share in “Nis-Struguras” enterprise. In the previous round, last year, only one company had bidden, i.e. Russian “Parom” from Moscow. Therefore privatisation was adjourned. Privatisation followed after investor failed to comply with assumed obligations as provided for in the privatisation contract. Government sources say the contract was annulled as “Tarom” failed to pay in due time the 1.5 million USD it had pledged to invest in line with the contract signed by both parties and laws in enforce.

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