In the current context in Romania, it is becoming increasingly clear that we need strong anchors. These strategic directions have a common element: the need to strengthen the economy’s resilience in the face of external shocks and structural uncertainties.

From this perspective, international reserves are not just a technical instrument of economic policy but become an integral part of the stability architecture that supports these objectives.

The macroprudential role of international reserves is a topic that I consider fundamental both for the evolution of the macro-financial framework in Romania in the post-crisis era and for the future, given the current circumstances characterized by a high level of uncertainty.

I will address this issue in the context of the following macro-financial trinity: international reserves, exchange rate, and financial stability.

The determinants of the accumulation of international reserves in different economies are not yet fully elucidated and remain difficult to quantify. Among the reasons invoked for holding foreign exchange reserves are strengthening confidence in the national currency, moderating episodes of excessive volatility in the markets, supporting the transmission of monetary policy, building assets for future generations or influencing the evolution of the exchange rate. While there is a relative consensus regarding the costs associated with maintaining reserves, reflected in the differential between domestic and foreign interest rates, opinions are much more divergent regarding the benefits, especially from a quantitative perspective. The difficulty of assessing external risks makes the assessment of the role of reserves in the formation of risk premia even more complex.

As for the appropriate level of international reserves, a reference approach is the rule proposed by Alan Greenspan, former governor of the United States Federal Reserve from 1987 to 2006, and Pablo Guidotti. According to the Greenspan–Guidotti rule, an economy should have a level of international reserves that fully covers its short-term external debt. This rule provides a useful starting point, but in practice it is insufficient, as it does not fully capture the complexity of modern economies — especially in the case of emerging economies, where the dynamics of private capital flows, the current external position, or the characteristics of the exchange rate regime also matter significantly.

From this perspective, for small and open economies in the process of convergence, such as Romania, a more comprehensive approach to the sizing of international reserves becomes necessary. These must be calibrated not only in relation to standard indicators, but also according to the risks associated with episodes of financial stress — such as sudden capital outflows, exchange rate pressures or rapid increases in risk premia. The experience of emerging economies, including those in Central and Eastern Europe, shows that such episodes are not just hypothetical, but can occur even in economies with solid fundamentals, which justifies maintaining adequate reserves as a central element of macro-financial resilience.

In recent economic literature, the idea that international reserves have not only a traditional role of protection against external shocks, but also a macroprudential function, especially in the case of emerging economies, has become increasingly clear. This perspective becomes all the more relevant in the context of the well-known tension between the exchange rate, capital mobility and monetary policy autonomy — what economics defines as a “trilemma” of macroeconomic policy.

This macroprudential dimension can be understood through several features observed in practice. First, the accumulation of international reserves tends to be accompanied by an increase in private capital flows, especially in the form of external debt. Second, economies that accumulate reserves at a faster pace are often also those that experience a stronger expansion of private external financing. Third, these developments are usually procyclical and time-correlated, reflecting the phases of the global financial cycle. Finally, higher levels of reserves are frequently associated with more open economies in terms of the capital account, which implies both opportunities and additional vulnerabilities.

Today, in Romania, the presence of twin deficits, i.e. the current account deficit and the budget deficit at a higher level than those observed in the region, indicates potential vulnerabilities that could be accentuated especially in the event of episodes characterized by international turbulence that would cause capital outflows. At the same time, approximately 50% of public debt is issued in foreign currency. On the other hand, in recent years, an increase in the appetite of non-financial companies for loans in other currencies has been observed, as a result of the interest rate differential. Thus, in just 3 years, i.e. from December 2022 to December 2025, the external debt of non-financial companies increased by approximately 17%. If we look at the maturity structure of the external debt of non-financial companies, we can see that at the level of December 2025, approximately 54% of the debt stock was short-term. Finally, our country continues to have the largest stock of foreign currency loans in the region, at approximately 30%.

In the following, I will present some personal considerations regarding the effects of international reserves:

• In the case of our country, the current particularities of the macro-financial framework underline the importance of international reserves from a macroprudential perspective as well.
• The causal chain may be a form of crowding out. At the same time, in line with the concept of diabolic loop, we could observe a deterioration of this negative causal chain in a vicious circle in the circumstances of adverse shocks at international level.
• Therefore, the current context characterized by a high level of uncertainty, as well as turbulence on international financial markets, recommends that international reserves remain at an adequate level.
• Thus, in periods characterized by major turbulence, the existence of an adequate stock of international reserves may have more important positive effects for emerging economies than for advanced ones.
• According to the assessments made by the International Monetary Fund within the Article IV consultations for the year 2025, Romania’s international reserves were at an adequate level, providing a comfortable degree of coverage of external risks. This assessment reflects not only the size of the reserves, but also their role in supporting macro-financial stability and strengthening investor confidence in the economy’s ability to cope with potential shocks.
• Today, Romania’s foreign exchange reserves stand at a historic level of 67 billion euros, while international reserves exceed 80.2 billion euros.

Maintaining an adequate level of international reserves, as is currently the case in Romania, represents one of the essential anchors that support the important adjustments that the Romanian economy is undergoing and strengthens its resilience. My conclusion is that, from a macroprudential perspective, international reserves can be understood as a saving for a rainy day mechanism, intended to limit the formation of vicious circles of the diabolic loop type, triggered by exogenous shocks with potential systemic effects, which could be amplified by episodes of sudden interruption of capital flows, described in the literature as sudden stops.