Tuesday, November 17, 2009

Romania cuts reserve requirements for fx liabilites

BUCHAREST, Nov 16 (Reuters) - Romania's central bank said on Monday it had cut minimum reserve requirements on foreign currency denominated liabilities with residual maturities of up to 2 years to 25 percent, from 30 percent. 

The International Monetary Fund halted a review of Romania's 20 billion euro aid package earlier this month and will delay a vital 1.5 billion tranche, possibly until early next year.

"Given the delayed external inflows, ensuring proper financing of government sector borrowing needs from domestic market resources in the last part of 2009 ... requires adequate financing conditions in the Romanian banking system," the Romanian central bank said in a statement.

Analysts said they had expected the move, following a Nov. 3 decision by the monetary authority to keep its main interest rate flat at 8 percent and three months after a similar 5 percentage point cut in minimum reserves in early August.

"It will boost liquidity in the market to finance the budget deficit," said Ionut Dumitru of Raiffeisen Bank in Bucharest.

The bank said the move would apply with the Nov. 24-Dec. 23 maintenance period.
Bucharest had pledged to pass laws including a cost-cutting budget by Dec. 10 to meet IMF targets.

But a centrist government was toppled last month and wrangling between rival parties ahead of a two-stage presidential election has slammed the brakes on reform, leaving Romania poised to miss the deadline.

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