Dec 18, 2023

Interview with Governor Octavian Armașu

We had the honor of speaking with Octavian Armașu, the governor of the National Bank of Moldova (NBM). Governor Armașu reflected on the 30th anniversary of Moldova's national currency, the leu. He highlighted the challenges faced in the initial years, including hyperinflation and macroeconomic instability. He also shared his views regarding the collaboration between the NBM and the CEF, expressing gratitude for the support and outlining aspirations for the institutional transformation of the NBM into a learning organization. Governor Armașu is currently chairing the CEF Governing Board, which will convene in Chișinău in June 2024.

As Moldova celebrates the 30th anniversary of its national currency leu, could you reflect on the historical journey of the leu? What have been the key milestones, challenges, achievements or any other memorable episodes in shaping the leu's role in Moldova's economic landscape over the past three decades?

First, I would like to mention that 30 years ago, with the introduction of our national currency, the Republic of Moldova significantly strengthened its independence. I am confident that today we stand as a sovereign nation, empowered to decide our own destiny, set our monetary policy independently and, thus, ensure our financial stability. This autonomy is largely attributed to the premises created by the introduction of our own national currency. 

In 1991, the Republic of Moldova fulfilled its dream of to become a sovereign, independent and modern state. However, without the monetary independence achieved on 29 November 1993, the introduction of our national currency, and the establishment an independent central bank, the story of our country would not have been complete. 

We started with near-zero foreign exchange reserves, hyperinflation, recession, and general macroeconomic instability. With the support of international financial institutions, bold and decisive steps were taken towards macroeconomic stabilization. Inflation gradually fell to single digits, foreign exchange reserves increased, and monetary aggregates began to be controlled. The Moldovan leu facilitated trade and the development of financial markets, integrated us into the global economy, and allowed the implementation of national monetary and fiscal policies vital for price stability, financial stability, and economic growth.

All this has created the premises to gradually reach a level of inflation within the target limits and compliance with international and European standards. For many years, international bodies, in their annual progress reports on Moldovan monetary policy, have noted the high level of efficiency and compliance with international best practices.

Even recently we have not been spared from serious challenges. The Covid pandemic brought along economic losses and made the inflation issue relevant again, putting it in the spotlight of central banks. Then another major shock – the Russian war in Ukraine – followed, as well as the war in Israel, which are causing human tragedies but also economic costs in the form of inflationary pressures and slowing economic recovery.

All these crisis episodes remind us that the stability of the Moldovan leu is a public benefit and crucial for the stability of the general economy. This shows how great our responsibility is, and also that of other authorities, since we all benefit from macroeconomic stability.

Today, the Moldovan leu has affirmed its role enshrined in the Constitution, and the National Bank has the necessary experience to ensure its resilience and keep the banking sector stable and reliable. European integration, which is our priority now and on which we are working together, means the well-being of the state and every citizen. That is why we believe that monetary independence and national currency are essential elements of our identity.

Today, it is clear that thanks to the National Bank of Moldova maintaining its independence, our country has a crisis-resistant financial system. The history has taught us lessons from which we have learned to be stronger, to love our country, and to act with dignity and professionalism. Consequently, we have a healthy banking sector that brings benefits to people's lives.

The collaboration between the NBM and the CEF has never been closer and more fruitful, as we have been working hand-in-hand on the institutional transformation of the bank into a learning organization. At the same time, you are currently also the chair of the CEF Governing Board. What are your aspirations in this respect?

I would first like to express my appreciation to the Center of Excellence in Finance for your valuable and continuous support rendered to the National Bank of Moldova (NBM) over the years, by organizing a series of highly useful trainings for the NBM’s representatives. These events, based on innovative approaches, have contributed tremendously to the development of the staff’s professional competencies and to the achievement of the NBM’s objectives. 

From this perspective, I believe that the fruitful collaboration and partnership between our institutions will certainly build the pathway for Moldova to become part of the great European family, and will foster the NBM’s integration into the European System of Central Banks.

Furthermore, the NBM has been offered a great opportunity to transform itself into a learning organization and strengthen its institutional capacities by implementing together with CEF the “National Bank of Moldova, Institutional Transformation into a Learning Organization” project. 

It is the first time that such a project is implemented by CEF in the region, and I consider it a great success that the NBM has become its beneficiary. Being among the first beneficiaries, we aim at becoming a role model for other institutions in Moldova and across the region in terms of organizational transformation and capacity building. Consequently, we are committed to ensuring the sustainability of project results, and to sharing knowledge and experience with potential interested parties from Moldova as well as other CEF member countries.

I am very honored to serve as Chair of the CEF Governing Board. During my tenure, I am going to provide all the necessary support for CEF governance, maintenance and development of the remarkable collaboration between the CEF and its members, as well as for expanding international cooperation. Therefore, in my capacity as Chair of the CEF Governing Board and considering the current challenging environment, I would like to take the opportunity to appeal to all central bank governors of the CEF constituency to support the CEF in securing financial resources from international development cooperation stakeholders for a new and ambitious project. It has been designed by the CEF for central banks and it is called “Strengthening Capacities for a Sound, Resilient, and Developed Macroeconomic and Financial Environment in South East Europe”. I am confident that implementing this project by all our peers will boost the necessary yields for our central banking community. 

Given the tradition of the Annual Meeting of the Governing Board being held in the country holding the chair of the CEF Governing Board, it will be my great pleasure and honor to welcome the CEF members in Chișinău at the upcoming event in June 2024.