Finance minister Citu says Romania needs negative interest rates

Romanian finance minister Florin Citu says that Romania needs negative interest rates to overcome this unprecedented crisis.

"Romania needs, as we see all over the world, zero real interest rates or even better, negative ones," minister Citu said in a Facebook post.

The Government has injected liquidity in the economy, particularly by increasing investments to the highest level in the past ten years, "but this is not enough, and we are not going to stop here," he said.

"Only through a stimulating economic policy can we have an explosion of economic growth in 2021," minister Citu argued. Romania has higher interest rates indeed compared to peers in the region, according to Ziarul Financiar.

Still, the daily implies this is partly because of the Government's massive demand for financing to cover the wide public deficit. Furthermore, the negative interest rates are not unanimously seen as a reasonable economic policy, among others, because they alter the very principle of saving and investments.

There is no reward for saving, and the minimum profitability of investors' projects is decreasing (sometimes below zero - hence loss-making projects get financing in principle) in line with the financing cost, in the context of negative interest rates.

When commenting on the liquidity injections, Romania's National Bank (BNR) specifies that such measures will be taken "without affecting the relative stability of the exchange rate" and "the measures will be carefully calibrated so as not to discourage domestic savings, the main source of financing for the real economy and the budgetary sector."

(Photo: Ilona Andrei/ Inquam Photos)