Transnistria’s central bank abolishes 10% fee on foreign currency purchases

By bne IntelliNews June 17, 2016

Transnistria’s central bank announced in a note on its website on June 16 that it has abolished the 10% fee set, on June 6, on purchases of foreign currency. The decision comes two days after the parliament’s economic committee announced it planned to discuss whether the central bank has the authority to set such fees.  

The central bank explained that it abolished the fee after it received letters from various trade organisations, without disclosing the content of the letters. Though not announced as such, the 10% fee was visibly an attempt to simulate local currency devaluation without actually devaluating it – a move fiercely opposed by the parliament which is dominated by opposition lawmakers.

Transnistria’s central bank, struggling to observe the narrow exchange rate corridor, has proposed to lawmakers - who have the final word on this matter - a 10% depreciation of the local currency. The monetary authority explained that fundamentals suggest 30% devaluation.

Lawmakers argued that the proposed devaluation would fuel inflation and, under current regulations, public sector wages and pensions, which have to be increased if headline inflation exceeds 5%. Government officials claimed, however, that the inflationary impact of a 10% devaluation would be only 4.6%.

The chairman of the parliament’s economic policy committee Alexander Martynov proposed to the government “a classic set of measures” - namely to further increase import duties in order to stimulate local production, and to regulate prices. He also mentioned the mandatory sale of forex by exporters, which has been partly enforced already by the monetary authority.

However, the government, which broadly supports the central bank’s requests for currency devaluation, enacted two decisions aimed at tackling the lack of products on the local market. These included halving the excise duties on car fuel, as well import duties. While this might help importers and avoid major shortages on the local market, it puts even more pressure on the government’s budget. Transnistria’s government has been paying only 70% of wages, pensions and other benefits since last year. It paid part of its arrears from a loan extended by the private group of companies Sheriff but the loan matures in October, just before the presidential elections. Sheriff is behind the opposition party Obnovlenie.

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