In the spring of 2009, at the height of the global financial crunch, Romania secured an IMF-led financial aid. The overall package, which included loans from the European Commission, the World Bank and other financial institutions, amounted to almost EUR20 billion, with most of the funds helping the central bank to reinforce its foreign currency reserves.
“A high reserve level, even if not used, discourages speculative attacks, helps the markets’ balance,” governor Mugur Isarescu told a banking conference Tuesday.
“I was one of those who pleaded for a lower amount, but now I realize I could have been wrong.”
The governor added a high amount was needed in the international context of that time, but conditions are different right now as risk aversion is sensibly lower.
Isarescu said the financial package and the reforms made under the agreement with the IMF and the EU helped lower the risk costs of Romania to levels that were even below those of some euro-zone member states.
The costs of keeping a high international reserve are significant, but they are worth the price, Isarescu said, as it brings advantages for the real economy, including the lower risk margins.
“The gain for the Romanian economy is higher than the cost of central bank’s reserves, of the Finance ministry’s buffer,” the central bank head said.
The two year stand-by loan signed in 2009 was followed by two other agreements with the IMF-EU-WB troika, but of lower amounts and Romania didn’t draw any funds of them. Authorities are pondering whether to sign another agreement in September, when the current arrangement is due to expire.