A gradual tightening of the monetary policy to curb inflation expectations won't mean that banks will reduce their loaning, stated Dorin Dragutanu, the governor of the National Bank of Moldova (NBM), in an interview with Radio Moldova. Describing the monetary policy provisions included in the agreement reached between the Moldovan Government and the International Monetary Fund at the conclusion of a third review under the IMF's arrangements with Moldova, Dorin Dragutanu stressed that the NBM's role was to combat inflation, or excess money in the Moldovan economy. “There has been some inflation pressure since the start of the year, and this is not only due to higher global prices on energy resources, but also owing to a greater domestic demand. And when domestic demand is rising, prices are rising as well. This amounts to inflation. Demand is rising due to larger amounts of remittances, meaning that people possess more foreign money which is exchanged and subsequently spent. On the other hand, domestic demand is also stimulated by accelerated loaning activity by the banks”, explained Dorin Dragutanu. The NBM governor further explained that, while it was beneficial when businesses got more funds from the banks to develop, it was also important to keep a balance in this area. “Not any growth pace is good. Last year the amount of bank loans grew by 14%, and in April 2011 by as much as 20%. There is a likelihood that this tendency will accelerate, pushing domestic demand further, thus adding to the inflation pressure. And so the NBM is trying to find a golden mean in which loans to the real sector are offered at an acceptable rate and domestic demand doesn't rise too much. This is why the NBM announced its intention to raise reserve requirements from 11% to 14% in the next few months”, said Dorin Dragutanu. The decision to raise the cash reserve ratio by 3 percentage points will result in as much as 580 million lei of banks' money being surrendered with the central bank. “This means that banks will have fewer resources to lend. But taking into account that banks will still be left with 3.5 million lei of available resources, there will be enough funds to be loaned to the real sector. Our objective is not to limit lending activity, but to temper the accelerated lending rate and consequently moderate the growth of domestic demand and curb inflation pressure”, said the NBM governor. The NBM has forecast an inflation rate of 8% for 2011, with a gradual decrease to 5%±1.2 p.p. in 2012, as stipulated in the National Bank's mid-term strategy.