Tiraspol, January 12. /Novosti Pridnestrovya/. The head of the Pridnestrovian Republican Bank (PRB) Vladislav Tidva explained why the Central Bank had set exchange rate band within 16 – 16,50 Pridnestrovian rubles for 1 USD.
"When setting an exchange rate target value for 2018, we were driven by two main factors: the first is the fact that we have to provide competitiveness of our manufacturers, and the second is that we have to balance the foreign exchange market. It will provide access to foreign currency both for the economic entities, and the population," Tidva told in the Question of the Day program on First Pridnestrovian TV channel.
The day before, the Central Bank had changed former parameters of an official ruble exchange rate (15.0 – 15.5 Pridnestrovian rubles for 1 USD) being in effect from the middle of June, 2017. The new rate has equaled 16.0 Pridnestrovian rubles for 1 USD since January 12, and the rate of USD has been established at the level of 16,8 – 16,85 rubles in exchange cash desks. The Central Bank explained the need of devaluation with the predicted negative foreign balance transactions (i.e. when importing goods more currency is withdrawn from Pridnestrovie, than it arrives when exporting – an editor's note) and also with projections on inflation and devaluation in the countries - the main trade partners of the PMR .
"The Central Bank pursues exchange rate targeting policy, but there are so-called external factors: regional instability, the prices for power resources in the region, change of trade terms. It calls for correction of monetary policy," Tidva explained.
The head of the PRB intends to keep ruble exchange rate within a new band, however, according to him, it will depend on external economic and political factors.
"If there are not any be any external shocks, then we will remain within the official exchange rate band of 16 - 16.50 rubles for a dollar," the chairman of the Central Bank noted.
It is important to note that banks can raise the exchange rate no more than by 10% against the official one. Tidva notes that in process of accumulation of currency reserves, the market and official exchange rates will approach.
"In 2017, the difference between the market and official rates was within 5%. So far we will remain in the same proportions. It is connected with the fact that we transfer the currency to importers with a 2 months delay. It also influences the cash market. As we begin avoiding transfers with a delay, and it will be possible only after accumulation of currency reserves which are still negative unfortunately, the market and the official rate will approach," Tidva explained.
It is a reminder that against the background of the currency crisis of 2016 the lack of foreign bank notes supply created "the black foreign exchange market" where the prices reached 18 – 20 rubles for $1.
Previously, Tidva noted that imminent devaluation had been caused by the wrong policy of the previous monetary authorities. The Central Bank issued huge amount of money in 2016, more than 900 million rubles was put in circulation i.e. actually the budget deficit was covered by the means of 'the printing presses'.
However, Tidva says that the PRB managed to contract reserve money by 646 million last year.
"It is the very 'money overhang' which had to be removed in 2017 in order to mitigate devaluation process," the head of the Central Bank told.
"We have withdrawn rubles from banks, and have promised to provide currency in the future. It is in long terms. We have agreed about it," he explained and noted that if the 'money overhang' had remained, equilibrium dollar exchange rate would had been significantly higher.
According to him, ruble exchange rate will depend on the situation of the Pridnestrovian economy in prospect.
"When we will have a strong economy, ruble exchange rate will become stronger," Tidva summarized.
It is to be noted that the Government predicts growth of economy within 2-4% in 2018. So far, according to the Central Bank, the deficiency of the Pridnestrovie's foreign balance is measured by estimate in the range of 146-190 million dollars depending on various scenarios of economic situation development.
