Moldovan leu's depreciation is caused by effects of world's financial crisis on Moldovan market: C-Bank Governor

The depreciation of the Moldovan leu in relation to the US dollar and the euro the last week was not caused by objective factors, but by the attempts to make the effects of the international financial crisis felt on the Moldovan market. Now there is no danger that these effects are felt on the domestic market, says the governor do the National Bank of Moldova, Leonid Talmaci, quoted by Info-Prim Neo. The governor presented a report to the Parliament on September 25 as to the situation on the currency market. Leonid Talmaci has said the banking system has resources enough to honor its duties and to further extent the crediting operations, as the National Bank (BNM) has enough currency reserves to counter possible excessive fluctuations of the exchange rate. On September 25, the BNM lowered the basic rate by 1.5 percentage points and the norm of compulsory reserves by 1.5 points, too. “These decisions prove the trust of the BNM's board in the positive development of macroeconomic stability indices,” Talmaci said. According to the governor, the official exchange rate of the leu to the dollar reversed the trend after September 4, depreciating 7.7% from 9.65 to 10.39 lei per USD1. This depreciation was triggered by the enhanced demand for foreign currency on the part of energy importers, amplified by the expectations emerging after the world financial crisis. BNM forecasts a continuous decrease of the annual inflation, by bringing it within the planned limits gradually. Under these circumstances, BNM considers that the period of harshening the currency policy ended and now they can consider measures to ease the access to loans. Now, Moldova maintains a floating currency regime, what entails interventions on the currency market only to prevent excessive fluctuations of the exchange rate, this being determined by the demand and offer of currency on the domestic market. In the conditions of significant inflows of capital from outside, which will not be able to be totally absorbed by the BNM's interventions, the appreciation of the national currency is possible. From the beginning of the year till 3 Sept., the official exchange rate of the leu to the US dollar appreciated 14.6% from 11.3 to 9.65 lei, following the increase of liquidity on the domestic market because of persistent inflows of currency into the country. As for the euro, the leu appreciated 15.9% from 16.7 to 13.9 lei. The more noticeable appreciation last July and August happened because of the appreciation of the dollar to the euro on the international market, says the BNM governor. According to Leonid Talmaci, the appreciation of the national currency is global phenomenon affecting more countries in the area and is not a destructive factor. The weight of the imported goods is but 80% of the exported goods, so the leu's appreciation does not significantly hit the Moldovan exporters, the governor said. The leu's appreciation contributes to slowing the rhythms of the growth of prices of imported energy, what has a beneficial effect on containing inflation. Other positive factors generated by the leu's appreciation are cheaper imported equipment, technologies, the growth of the general level of the living standard, Talmaci says. The opposition MPs, after repeatedly expressing concern with the situation on the currency market, seemed not persuaded by the arguments of the BNM's governor. The Democratic faction (PDM) put up a simple attitude bill on the “crisis situation on the Moldovan currency market.” BNM is to answer a series of questions posed by the Democratic MPs.