Measures to restart economy
The head of the Central Banks financial stability department, Eugen Radulescu, has explained why the institution is prudent when it comes to monetary policy..
Daniela Budu, 05.06.2020, 13:50
The Romanian Central Bank’s monetary policy must be prudent, says Eugen Radulescu, head of the institution’s financial stability department. In his opinion, a more aggressive cut in interest rates might trigger almost immediately a serious depreciation of the exchange rate and undermine the trust of foreign partners. The dimension of the budget deficit and current account deficit and the perspective of their increase have prompted the most important rating agencies to change their forecast for Romania from stable to negative, which is dangerously close to being removed from the list of countries recommended for investment, Radulescu explains. Also, according to the bank official, the impact this negative perspective could have on the economy and particularly on its financial situation is terrible, as the country’s capacity to finance the deficit on the external market would seriously deteriorate and the cost of loans would explode. Adding to this is the fact that Romania entered the pandemic period without budgetary or medical reserves.
Moreover, Radulescu says that the Romanian Central Bank has had a rather prudent behavior, as it increased liquidity in the banking system and reduced the reference interest rate. On the other hand, following Thursday’s government meeting in Bucharest, authorities have announced that the SMEs invest programme has been improved and the budget allotted to it can be increased, so that the number of companies accessing these funds could triple in a matter of weeks. Over 3 thousand companies have received financing so far, totaling around 520 million euros. Finance Minister Florin Citu has announced that the programme can support 40 thousand companies at the most, and, if there is the case, the government will earmark more funds to it at the next budget adjustment.
A memorandum was also adopted at Thursday’s meeting, based on which normative acts implementing a similar programme aimed at supporting large companies can be drawn up. Minister Florin Citu explains what kind of companies can apply for funding: “Part of the SME category are companies with turnovers of more than 4.1 million euros in 2019 or which are part of the large company category — and here we included a category of companies that have not been included in the SME programme or any other programme — companies that are affiliated entities or partners and have over 250 employees. So now, with this programme, we have covered all companies in Romania that can access financing.”
Around 1.6 billion euros are available under the large company programme, which will become operational in 4 weeks at the most. (translated by Elena Enache)
