The foreign currency reserves of Romania’s central bank increased by 4.2% y/y to EUR 32.5bn at the end of December 2013, the country’s monetary authority announced. The forex reserves in the central bank’s vaults thus climbed slightly on the year but reached the same level where they were three years earlier at the end of 2010.

The forex level is safe and reducing it would create problems forcing the government to pay back quicker its debt and rising re-financing cost, central bank governor Mugur Isarescu was quoted as saying by HotNews online publication.

The central bank’s foreign currency reserves have increased sharply in 2009 and in early 2010 – by some EUR 7bn close to the current level, under the EUR 20bn programme with the IMF, World Bank and the EU. The stock of loans borrowed by the central bank from the Fund with the sole purpose of boosting own forex reserves exceeded EUR 10bn in Q3 of 2012 – when they were thus roughly one third of the EUR 31bn forex reserves at that time. In the meantime, the central bank has returned part of the money to the Fund, to which it still owed EUR 5.74bn at the end of October 2013.

There are some EUR 6bn held by the banks as compulsory reserves of the commercial banks at the central bank, governor Isarescu stressed in December [plus the equivalent in local currency of some EUR 3-4bn]. No official data has been released in this regard, though.

The monetary authority wants to cut the required reserve ratios for both local and foreign currency liabilities in 2014, the governor has said. This would predictably put pressure on the forex reserves also. The required reserve ratio for forex liabilities was cut from 40% before the 2008 credit crunch to 20% and there is no reason to not cut it more, Isarescu argued.