As of March 30, Moldova’s official foreign reserve assets amounted to $3.426 billion, which is by $647 million less than in October 2021, when they were at their highest level, or $4.73 billion. According to the National Bank of Moldova, this decrease is due to two concurrent external shocks, and in their context, the institution intervened with several measures. At present, official reserve assets remain at a fairly high level which is enough to meet the challenges associated with geopolitical and post-pandemic instability. This was stated by NBM president Octavian Armașu in Parliament, where he was heard at the request of Communists&Socialists.
One of the two shocks is the crisis in the energy resources market, marked by a significant increase in prices for gas and fuel imports. The second factor is the escalation of the geopolitical situation in the region, namely the military conflict in Ukraine. Octavian Armașu said that in order to mitigate the effects of these shocks, the NBM responded by selling on the local foreign exchange market amounts needed to limit excessive exchange rate volatility, meet the demand for foreign currency and maintain Moldova’s macro-financial stability. Between November 2021 and March 2022, the NBM intervened with net sales of $712.1 million.
“The armed conflict started by the Russian Federation against Ukraine has caused a stir in the local foreign exchange market, which was already operating in conditions of net foreign exchange demand. The agitation lasted 23 calendar days, from February 24, 2022 to March 18, 2022. During this period, the foreign exchange deficit widened 6.5 times compared to the deficit recorded for 23 calendar days before the Russian invasion of Ukraine, i.e. in the first 23 days of February. Thus, the need for intervention to calm the market by not admitting a strong volatility of the leu exchange rate has increased, with the resilience of foreign exchange reserves allowing this”, explained the central bank president.
Armașu stated that official reserve assets continue to exceed the thresholds of adequacy indicators applied in international practice. Coverage for future imports is at 4.8 months. “The minimum threshold is three months. Once again, I insist that we have sufficient reserves in our official assets. In the case of the war in Ukraine, there is a high probability that part of the official reserve assets will be recovered as a result of the processes specific to the post-crisis periods, i.e. the de-dollarization of deposits and savings. In other words, the citizens will return to the market to sell currency and receive more lei”, he noted.
Commenting on Armașu’s speech, Deputy Speaker Vlad Batrîncea (Communists&Socialists) declared that the central bank’s intervention boiled down to “sterilizing the money supply, nearly quadrupling the lending rate, suppresing the remaining businesses”. According to him, the NBM only protects the interests of commercial banks.
