MARKET MECHANISMS DETERMINE LEU COURSE, NOT NBM’S DECISION

The National Bank of Moldova (NBM) reminded that the Moldovan leu rate is determined by market mechanisms, not by its decision, this is said in the bank's statement.

"The NBM does not forecast or focus on a certain level of the rate, the main goal of the bank is price stability. In the inflation targeting mode, central banks use the interest rate as the main instrument of inflation in the country, which also indirectly affects the exchange rate," the document says.

The Bank points, that it constantly monitors the development of the domestic currency market and intervenes to prevent excessive fluctuations in the exchange rate.

Last week President Igor Dodon said that "a strong leu negatively affects Moldovan exporters." He expressed his disagreement with the NBM, speaking out for some devaluation of the national currency.

"I believe that the bank is doing the wrong thing with the leu rate. In the current situation, the weakening of leu will not lead to an increase in prices, taking into account the fact that tariffs for some services, which are regulated, are reduced," the President said.

Veacheslav Ionita, an expert in economic policy at Institute for Development and Social Initiatives Viitorul (IDIS), believes that strengthening lei is beneficial for the population, as "there is a containment of price growth, which in times of crisis is a lifeline for the poorest."

"Strong leu brings losses to exporters, especially those who export products to Russia. This year they are losing 20% of their income because of the rate. In the conditions of crisis and drought, strong lei is the third blow for farmers," the expert notes.

He also draws attention to the difficulties for domestic producers due to the strong leu.

"They are losing money and losing their markets both, at home and abroad. Because of the exchange rate, their products are more expensive than those produced by Turkey and Ukraine, which makes the domestic market oversaturated with imports," Ionita calculated.

He considers it unacceptable for politicians to interfere in determining the exchange rate.

"We had interventions from politicians and pressure on the NBM, but they were associated with a sharp depreciation of leu. Now for the first time we are in a situation where politicians are putting pressure on the NBM because leu has strengthened," Ionita said.