Veaceslav Negruța, economic expert of Transparency International Moldova, noted that the inversion of the trend witnessed recently on the currency market, as regards the euro and the dollar, is related to the winter holidays. In IPN’s public debate “Fluctuation of exchange rate, what it depends on and what we should know about it?”, the ex-minister of finance said this tendency that is different from that of the last two months will persist at least until January 10, but afterward will most probably return to the previous state.
The expert of TI-Moldova said the currency segment should not be separated from a general macro-financial context. As a result of the COVID-19 pandemic and the drought, serious deformations in the economy appeared and the financial resources are reoriented to other priorities. Therefore, it will be hard to stage a return. A plan of anti-crisis and financial stabilization measures is needed, including in the public finance sector. This would give more predictability to the subsequent measures of the NBM in its monetary policies and in its interventions on the currency market. The plan should be worked out as a result of broad discussions and should facilitate the process of taking appropriate decisions, including for the currency market, and reduce the eventual nervousness of the population.
In another development, Veaceslav Negruța said the state of the economy is the first indicator that determines the price of a foreign currency in the Republic of Moldova. Respectively, the decisive factor is the export of goods and services produced in Moldova, which later offers the necessary quantity of currency on the domestic market. The price also depends on import as a large part of the resources in a small and open economy, especially the energy ones, are imported. In this case, the importers need currency to make payments to suppliers.
“The export and import aspects are decisive and a lot depends on the development stage at which the national economy is. If we have economic decline, we evidently consume fewer energy resources. We need less electricity, natural gas to produce. When there is economic growth, the tendency is the opposite.”
The expert noted the remittances from abroad are another traditional element on which Moldova’s supply on the domestic market has depended. During the last 10-20 years, remittances were considerable and grew constantly, except for particular periods and crises that affected the incomes of people, who transferred less money.
The inflows of loans and the servicing of these loans in the public or the private sector are another decisive element. “When the economy in Moldova holds interest for foreign investors, these come and invest here or lend to their branches and representative offices here. The money provided indirectly, or even directly, reaches the currency market and creates supply or demand of currency. The state, when it has to repay a loan taken out from the Word Bank or the European Union, in particular periods when this money is used to finance the budget deficit, the Ministry of Finance goes and exchanges a part of these resources with the NBM so as to honor a part of the costs that are traditionally incurred in lei,” stated Veaceslav Negruța.
He also said that the NBM is permanently in the middle with its foreign exchange reserves that now reached a record level of US$3.7 billion. With these reserves, the NBM can intervene to diminish somehow or to accentuate particular developments on the currency market, to make the necessary corrections to the exchange rate, depending on the situation.
The public debate “Fluctuation of exchange rate, what it depends on and what we should know about it?” was the 162th installment of the series “Developing political culture through public debates” that is supported by the Hanns Seidel Foundation.