Mr Vice-Governor, in January, the foreign exchange reserves of the National Bank declined by almost USD 170 million mainly on the back of net sales on the forex market. Does this mean that the National Bank intervened to cushion depreciation of the ROL?

The National Bank of Romania is concerned not only with the development of the exchange rate but also with the well-functioning of the forex market, i.e. its equilibrium under the present managed floating regime. The forex market in Romania proves its significance yet again in light of the following: the overshooting of the official forex reserve target by USD 313.6 million at year-end 2001, fuelled also by USD 174 million in net purchases of the NBR last December; a more balanced development of the ROL against both the EUR and the USD; and eventually, the sustainable real appreciation of the ROL, in the past year, by about 6 percent against a currency basket, of which the EUR takes 60 percent and the USD 40 percent.

January 2002 saw greater volatility of exchange rates and days when the ROL posted strong nominal appreciation. The NBR performed both sales and purchases of foreign currency, and finished the month as a net seller. It is worth mentioning that, since 1999, the systematic pressure on the domestic currency the NBR had to grapple with has been towards real appreciation of the ROL.

What actually determined the significant intervention of the National Bank in the market (to sell foreign currency)?

On one hand, in January, we faced restoration of forex positions of non-bank customers who had to cope in December with higher demand for domestic currency to make end-of-year outlays. On the other hand, although the estimated current account deficit is below the targeted level, the deficits for December and January will still turn out to be substantial. Last but not least, since the private external debt has grown - and this is a normal development - accounting for one-third of external debt stock, the domestic forex market is going to play a more important role in the partial refinancing of the debt and its servicing.

Banks have purposefully increased their forex reserves towards the end of 2001 while the NBR, an institution having an essential role in maintaining the equilibrium of the forex market, is keeping a keen eye on this indicator as well as many others.

How will the National Bank act in the future?

A: The NBR's occasional interventions, in the case they are required, will aim to preserve the well-functioning and equilibrium of the forex market as well as to avert major swings in this market. At the same time, the central bank remains supportive of a sustainable moderate appreciation of the domestic currency compatible with both maintaining external equilibrium and backing up the disinflation process. I point out that real appreciation of the domestic currency will rely on expected capital inflows, in line with further increase in foreign exchange reserves.

*) Translation.