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BNR governor argues Government is fully responsible for external deficit

November 2, 2021

Romania's public deficit of 9% of GDP in the context of a current account deficit of only 5% means that "the government sector is the one that creates the [external] deficit altogether," governor of the National Bank of Romania argued in a conference, quoted by Hotnews.ro.   Isarescu's statement should not be perceived in a strictly academic sense (it would be debatable, albeit not in the case of Romania), but rather as a policy message. Governor Isarescu once again urged the Government to take steps toward fiscal consolidation, implying at the same time that the monetary authority will do its best to keep both the exchange rate and the inflation steady.   „It means that the non-governmental sector posts a surplus by 4% of GDP," governor Isarescu claimed.The exchange rate correction is not a good solution, because a weaker currency will not stimulate the government sector (to reduce its deficit). The solution is the budget correction, says the BNR governor.   "The budget correction is not easy, including due to these political situations, sometimes incomprehensible, and due to the electoral cycle", concludes Mugur Isarescu.

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