Central Bank Independence in Transition Economies

10B. Objectives, Formulation of Monetary Policy and Relations with 

other State Institutions  

The statue provides an objective of preserving the stability of the national 

currency “within the framework of the country' economic and financial policy”. The 

National Bank formulates and conducts monetary and credit policy to achieve this goal 

(Art.1).  

10C. Limitations on Lending 

The Bank can grant advances to central government to cover budget deficit and 

sets zero interest rate on this credit. The total amount of the advances cannot exceed 10 

percent of the total approved budget (and twice the sum of the capital and reserve fund 

of the Bank) (Art. 29, 31). The Bank keeps the current account of the State Treasury 

but the Bank status does not specify the method of recording the operations on this 

account. As a result the NBR automatically covered budget deficit. In June 1993 the 

Bank and the Ministry of Finance signed an agreement according to which only the 

possible debit balances on the Government accounts with four banks (the National 

Bank, the Romanian Commercial Bank, the Bank for Agriculture and the Romanian 

Bank for Development) are covered by the NBH.