Striking four zeroes off the ROL's tail will help the National Bank of Romania (NBR) turn the Romanian leu into the region's most valuable currency overnight. At least on paper: one ROL at the NBR exchange rate will buy more than 8 Czech korunas, slightly more than one Polish zloty and more than 66 Hungarian forints.
"The new ROL will be much stronger after shedding the zeros. It is an improper manner of speaking, yet it has a higher nominal value than the currencies of the neighbouring countries," NBR Governor Mugur Isarescu told a news conference yesterday, one day before the start of the first re-denomination stage: the displaying of prices in both the new and old system that will be valid from March 1, 2005 to June 30, 2006.
As of today, exchange rates published by the NBR and by commercial banks will offer two prices: the old ROL and the new ROL in which 1 euroa3.6422 ROL.
Although the central bank does not believe Romania will be able to replace the ROL with the euro any sooner than 2012-2014, one benefit of re-denomination is that Romania will be more credible when that day comes that ROL will be able to be taken through Europe. "Think of what would Romania be with all those zeroes in seven to nine years' time, including a ROL that will become fully convertible and enjoy international circulation, moving around with its tail coiled up is a matter of months. It will be hard for foreigners to see it as a convertible ROL," the head of the central bank said. He added: "sometimes the form influences content." Until such time comes that ROL can be exchanged outside Romania, the re-denomination promises the other practical advantage that "change will be given", Isarescu explained, saying that Romanians are often frustrated by not receiving change from merchants, who claim a lack of small change. He says the new ban (1 new ROL a 100 bani) will be the size of a eurocent and circulate in sufficient amounts.
"At a price of 1.99 RON (new ROL) you hand over 2 RON and get 1 ban back, and I believe this is normal. This means the ban will have a value and will be given back as change," Isarescu said.
As of today, merchants are obliged to display prices both in ROL and in RON.
The NBR governor insists that "exchanging" the ROL for the RON as a mere banking operation at bank desks can only be talked about after January 1, 2007, though even then no fee will be deducted. Exchange will be possible only at NBR offices and at certain number of commercial banks appointed by order of the governor.
Isarescu answered the signals from the market about the public not getting sufficient information: "We are completely on schedule. We felt there was no need to make additional fuss before the start of the dual price display."
The central bank has decided that June 30 and July 1 will be bank holidays as far as the population is concerned, though it is allowing individual banks to decide whether to halt operations with clients on those days. "It seems like a simple thing, yet any change stirs emotional responses," Isarescu admitted, explaining that the confidence in the domestic currency will increase once one loaf of bread will be possible to buy at 50 bani. razvan.voican@zf.ro
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