National Bank sets record for money supply sterilization

The National Bank of Moldova set a new record of withdrawing cash from circulation (money supply sterilization) in November, due to a high rate of inflation. In total, the central bank withdrew 1 bln 341.3 mln lei from circulation. This is the largest volume of money supply sterilization in the current year and in the last four years (2003-2006). If in the last two months, BNM operated only with its own certificates to withdraw cash, in November it resorted to the mechanism of accepting deposits from commercial banks. The central Bank’s interventions in the monetary market are inevitable if, in order to maintain the stability on the currency market, BNM intervenes and buys the excess of foreign currency. This excess is generated by the money transfers from abroad by Moldovan citizens. But the Bank immediately intervenes with monetary instruments to withdraw the excess of MDL (lei), generated by its money issuances through the purchase of foreign currency. The experts assert that this situation denotes the fact that in Moldova the investment opportunities for citizens aren’t attractive, that’s why a large sum of money is circulating freely on the market, exerting considerable pressures on the currency market and consumption prices.