Central bank says single-digit inflation in 2008 is possible

The National Bank of Moldova (NBM) considers that the objective of bringing down the inflation to single digits in 2008 is achievable, the first deputy governor of the central bank Victor Cibotaru said at a roundtable meeting attended by reporters and independent economic analysts on February 26. The participants discussed aspects of the monetary-currency policy, especially the NBM’s steps and instruments used to contain the inflation, Info-Prim Neo reports. “The inflation rate of 1.5% in January 2008 is rather high compared with December 2007. This seems to be a secondary consequence of the drought and of the rise in food prices, which is a problem faced by many countries. Another cause is the increase in the prices of the so-called administered services such as electric power and gas, which do not rise in price every month. For these reasons, we consider that the January inflation is a separate case and cannot be regarded as a modification of the trend or the beginning of a new trend of rising inflation,” Victor Cibotaru said. Speaking about the monetary indicators, he said that the money base and the volume of money in circulation had decreased in January. The volume of released loans increased insignificantly. “The balance of 12-month loans rises at a steady rate of 50%. But the bank deposits increase at almost the same rate, of 45%. That’s why we should not sound the alarm owing to the unordinary situation in January. We will follow the evolution of inflation in February and the monetary indicators and will pronounce on the developments later,” the NBM official said. According to Victor Cibotaru, even if one takes into account the external situation and the fact that Moldova imports all the energy resources it needs, there are sufficient levers to maintain the rate of inflation within the projected limits. He mentioned the agreement signed by the central bank and the Ministry of Finance last September for converting the Government’s debts to the NBM into state securities by the end of this quarter as planned. This is an additional instrument for administering the liquidity. The NBM will use this portfolio in accordance with its objectives, will sell the securities or will expect that they are redeemed. Late last year, the bank accounts of the National Social Insurance House (CNAS), the National Health Insurance Company (CNAM) and of the budgets of the territorial-administrative units were moved from commercial banks into the common account of the Ministry of Finance, in the Treasury. Such a measure supported the central bank in its efforts to reduce the excessive liquidity on the market and to ensure a better control over inflation, the first deputy governor of the NBM explained. Victor Cibotaru also said that the weekly meetings held by the Committee for Administering the Liquidity composed of representatives of the central bank, the Ministry of Finance, CNAS and CNAM, form part of the same efforts. Other measures are being taken such as the payment of salaries and the performance of other operations through bank cards. Victor Cibotaru stressed that the NBM cooperates with the central public authorities in curbing the inflation. It expressed readiness to assist the National Agency for Competition Protection in determining the real position of the economic entities on the market, establishing interconnections with the affiliated companies and persons. Asked by reporters why the central bank does not use the sale of precious metals as an instrument to reduce the volume of money in circulation as many countries do, Cibotaru said that the number of people that will want to take part in such transactions will probably not exceed the number of persons that purchased golden objects from Aureola (a jewelry store – e.n.) in the 90s (which is rather low – e.n.). Besides, the legislation must be modified so as it allows the commercial banks to sell monetary gold. Moreover, the banks will need special transport and guard as the precious metals cannot be transferred to bank accounts. The first deputy governor of the NBM asked the reporters and independent economic analysts to think over the statements about inflation they make because the press, according to Cibotaru, plays a major role in creating the inflationist expectations. “Such expectations can generate inappropriate behaviour in people,” the official said. The former Minister of Economy and Trade Valeriu Lazar, presently director of a consultancy company, also said that the media should be responsible, especially when delivering messages to officials. Lazar said that the year 2008 would be difficult as one would have to promote reforms that had to be implemented long ago. He referred to the calculation of the heating charges according to the expenses and other reforms. “We are in a pre-electoral year. All the previous ruling parties raised the salaries and pensions before elections. The social element cannot be neglected. The external situation is also unfavourable – the prices of oil products and energy resources as well as of food products are rising. If the central bank manages to maintain the inflation under 10%, the bank’s employees will deserve all the praise, Lazar said.

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