CURRENCY
The currency unit of the country is the leu (plural, lei), divided into 100 bani. It is nonconvertible and usable only within the country. The leu is officially defined to contain 148.112 milligrams of fine gold, so that 5.53 lei are equivalent to US$1. This basic rate of exchange became effective on December 23, 1971, in the wake of the agreement reached by the United States with other major Western trading nations to devalue the American dollar; before that date the rate was 6 lei per US$1. The basic rate is used in foreign trade accounting and is also applicable to nonresident accounts created by a transfer of foreign currencies into Romania.
A wide range of official noncommercial or tourist exchange rates is in effect for residents of other communist countries. These rates vary from about one-third to more than double the basic rate. Tourist rates for noncommunist country currencies embody a bonus of 189 percent over the basic rate, making 16 lei equivalent to US$1. In addition to the official exchange rates there are at least thirty-seven semiofficial rates resulting from seven multilateral trade and payments agreements with members of the Council for Mutual Economic Assistance (COMECON) and thirty bilateral agreements with other communist and noncommunist states.
The state has a monopoly of foreign exchange. Control over currency and foreign exchange is vested in the National Bank and administered by the bank jointly with the Ministry of Finance and the Romanian Foreign Trade Bank. All foreign exchange realized by state agencies from exports and other foreign operations must be surrendered to the Romanian Foreign Trade Bank, which also controls all exchange expenditures abroad.
Transferability of funds by private individuals is strictly limited. Only 15 to 30 percent of inheritances, royalties, pensions, and support payments derived from abroad may be used or retransferred; from 70 to 85 percent of the sums received must be surrendered at the tourist rate of exchange. Residents may send small amounts and get travel allocations to COMECON and some Western countries. Most currency transactions by individuals with residents in Western states are prohibited. Residents may not own foreign currencies or securities or have bank balances abroad without official permission, nor may they import or export Romanian banknotes. They are forbidden to own or trade in gold, to export jewelry and diamonds, and to engage in foreign merchandise trade.
Controls over financial transactions by state agencies in domestic currency and foreign exchange were tightened by a decree issued in September 1971. A companion decree also provided for much stricter border controls over foreign exchange, precious metals, and jewelry carried by individuals entering or leaving the country. Violations were more precisely defined, and penalties were substantially increased to discourage illegal traffic.
FOREIGN TRADE
Foreign trade is of crucial importance to the country's industrial development because imports must be relied upon for a large part of the requirements for materials and equipment. Trade has been expanding at a rapid rate, and imports have been growing faster than exports. In a bid for economic and political independence from the Soviet Union, the country's leadership succeeded in reorienting a substantial portion of its trade toward the industrial nations of Western Europe during the mid-1960s (see ch. 10). After 1967, however, the inability to generate enough exports salable in Western markets to balance imports forced the country to turn increasingly to the Soviet Union and other Eastern European countries for its import needs.
Foreign trade is a state monopoly. Trade policy is established by the PCR and the government, and its implementation is the responsibility of the Ministry of Foreign Trade. Authority to engage in foreign trade operations has been partially decentralized by a law enacted in March 1971, although initial steps in this direction were taken under administrative regulations in the beginning of 1970. The main purpose of the law has been to raise the efficiency of foreign trade and to help expand exports. These ends are to be attained through greater exposure of domestic producers to international competition and by providing incentives for them to meet it. The law was also intended to create favorable conditions in the country for the establishment of industrial enterprises with foreign participation.
Before the adoption of the trade reform law, only specialized foreign trade enterprises directly subordinated to the Ministry of Foreign Trade were empowered to carry on trade activities. Producing enterprises were completely divorced from foreign buyers. They delivered their export goods to the foreign trade enterprises at domestic prices, without knowing to whom or at what price the goods were sold abroad. Imports were also obtainable only through foreign trade enterprises at domestic prices, regardless of their acquisition cost. Foreign trade losses were covered out of the state budget, and enterprises assumed no risk whatever in foreign trade transactions. Producing enterprises had no interest in marketing their output abroad or in making their products competitive in world markets; neither were they interested in using domestic substitutes to avoid the need for imports.