Accessibility links

Breaking News

Romania: Bank Governor Optimistic About Profits

Bucharest, 26 March 1997 (RFE/RL) -- The governor of the Romanian central bank, Mugur Isarescu, has expressed optimism that by the end of this year, foreign investors will be able to repatriate their business profits in full without restrictions.

Isarescu told an RfE/RL correspondent in Bucharest this week that present restrictions on taking profits out of the country should be lifted within that time frame -- provided that the government's new economic reform program succeeds as expected.

He said that at the same time the Romanian currency, the leu, should be able to reach the convertibility standards requested by the international financial institutions, such as the International Monetary Fund.

Isarescu noted that since last month, Romania has had a functioning foreign exchange market, and that if this market's viability is proven in the coming three months, Romania will have taken the first step towards convertibility for current account operations as well as for import/export operations.

Our correspondent reports that two key issues hampering foreign investment in Romania during the last seven years have been the inability of businessmen to take home their full profits, and the lack of convertibility of the leu. Romanian Prime Minister Victor Ciorbea said last week that his government plans to revise as many as 80 laws by early May to promote foreign investment. He said foreigners will be allowed to own property in Romania and that the transfer of profits out of the country will be simplified.

Isarescu noted that at present there are also currency restrictions on Romanian citizens. Romanians can only change from lei to hard currency a maximum of $500 or equivalent per year. He said that when this restriction is likewise lifted, the government could consider that Romania complies with IMF criteria for convertibility.

Isarescu said the removal of the restriction on Romanian citizens should be seen as a sign of the government's committment not to put curbs on the Forex market.

Since last month's liberalization, foreign and Romanian banks have been allowed to deal freely in hard currencies without any interventiosn from the central bank.

However the governor said that because of the market's fragility, the National Bank is maintaining for the present three types of intervention in the monetary sector. Firstly, indirect intervention in the form of restricting the availability of lei in order to stabilize exchange rates and keep hold of inflation. Secondly, by establishing Forex transaction rules and by working to eliminate speculators. And thirdly, by purchasing foreign currency as required to help stabilise exchange rates. Isarescu noted that so far this month the central bank had bought more than $100 million for this purpose.

Our correspondent reports that in the past few weeks, the leu has been stable on the Forex market at about 7,000 to the dollar. In the previous months, the value of the Romanian currency against the dollar had swung from 4,000 in December to 9,000 in mid-February.

Looking to prospects for the rest of the year, Isarescu said he expects healthy economic activity without too much inflationary pressure. He expressed optimism that the government reform program will succeed. Our correspondent notes that Iscarescu was designated by parliament in 1991 to run the National Bank of Romania for eight years, and he has gained wide respect in the country for his relative independence from the political process.

Radu Busneag is a Bucharest-based economic journalist who regularly contributes to RFE/RL.