What international reserves are and what role they play in the economy
Automatically translated summary. The full text is available in Romanian.
This informative note, produced under the National Financial Education Campaign run by the National Bank of Moldova and Expert-Grup, explains what international reserves are, how the National Bank of Moldova manages them, and why they matter for the economy of the Republic of Moldova.
International reserves serve at least three purposes: managing financial crises, receiving and repaying external loans, and attracting investment. In February and March 2022, the National Bank of Moldova sold about USD 370 million from reserves to meet panic demand for foreign currency, avoiding a sharp depreciation of the leu and runaway inflation. Reserve adequacy is judged by several indicators, such as covering at least three months of imports and fully covering short-term external debt.
Reserves are managed on the principles of safety, liquidity and diversification, and are built up mainly through currency purchases and external loans and grants. They cannot be spent on roads or company financing, because that would mean spending the same money twice: the foreign currency is the counterpart of the lei already issued. Moldova, unlike major oil exporters, has no sovereign currency funds and has had no trade surpluses in the last 30 years.
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