Romania’s foreign exchange reserves fell by €4.8bn in September to €60.06bn, according to data from the National Bank of Romania (BNR), as the central bank faced pressure on the leu amid a prolonged political crisis and public debt servicing.
About €2.7bn of the decline was accounted for by payments related to the servicing of Romania’s external public debt. The government also converted part of the foreign currency held at the BNR into lei, although the amount was not disclosed. The funds include disbursements received under the EU Recovery and Resilience Facility, which are held by the government at the central bank and form part of the foreign exchange reserves.
Analysts attributed part of the remaining decline to BNR intervention aimed at limiting pressure on the leu, as political uncertainty encouraged foreign investors to reduce some of their Romanian portfolio exposures.
The leu came under renewed pressure after the latest reserve data were published, weakening to around RON5.35 per euro in the hours following the closure of the Bucharest interbank market, from below RON5.28 per euro at midday, according to the central bank’s reference quotation.
“I have no way of commenting on the exchange rate level. The BNR is trying to find a balance between the exchange rate and interest rates. We still maintain some limits, but there are certain consequences. The withdrawal of liquidity from the market creates some difficulties for financing the economy and the budget,” BNR spokesman Dan Suciu told Economica.net.
The move in the currency market coincided with higher borrowing costs. The yield on Romania’s 10-year local-currency government bonds reached 7.75% on the same day before easing to 7.67%, compared with about 7.1% a month earlier.
The decline in reserves leaves Romania with €60.06bn in foreign exchange holdings, while the BNR continues to balance exchange-rate pressures against the impact of liquidity management on government and private-sector financing.
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