Estimations showed that Romania’s deficit financing for 2009 could have ranged between EUR 7.5 billion and EUR 16 billion, dependent upon foreign investors’ sentiment and their willingness to roll over the credit lines extended to banks and private companies. This gloomy sentiment was reflected in the weakening of the leu during October 2008 – February 2009. In this context, the authorities have decided to implement policies aimed at ensuring minimum cuts in Romania’s foreign financing. As early as December 2008, the economic programme was envisaged to focus on narrowing the external deficit of both public and private sectors, containing the impact of recession, averting a currency crisis as well as on easing inflationary pressures. Attaining these objectives required the design of adjustment measures meant to bring the economy onto a sustainable path with minimal losses, including in terms of employment. Given the sudden stop of the massive capital inflow episode, the leu’s exchange rate developments posed serious challenges. While in the past foreign currency inflows generated the overappreciation of the leu well above the level indicated by exchange rate fundamentals, the reduction in external financing and the degree of uncertainty tended to result in the unwarranted depreciation of the leu. The challenges were all the more so great that, despite the heavy foreign currency purchases performed during 2005–2007, the NBR only managed to contain the unsustainable appreciation of the leu, instead of completely avoiding it.
The reserves are thus a rainy day fund, an endowment fund, and a stability fund. The imperative to hold a buffer against crisis is rooted in Singapore’s geography and history. Singapore is a city state smaller than Greater London. It has no natural resources and imports most of its food, including water. When it became independent in 1965, it had no hinterland and meagre financial reserves. It depended mostly on entrepot trade and hardly had an industrial base. It was not expected to survive, let alone succeed. An acute sense of vulnerability has been part of Singapore’s DNA since its birth. This sense of vulnerability, in turn, underpinned two convictions: first, that the only way to survive and make a living is to make ourselves relevant to the 1/7  BIS central bankers' speeches  world; and second, we must build up strong buffers so that we can withstand the shocks that come with being so small and open to the world. As Singapore grew and prospered as a business and financial centre, its vulnerabilities to the the vagaries of global trade and financial cycles also grew. The need to build up a sufficient rainy day fund to tide us through shocks and crises has remained as relevant as ever. Total trade is three times the size of the Singapore economy. Gross capital flows into and out of Singapore are 77% of GDP. The role of the reserves as a rainy day fund is not theoretical. The reserves have indeed served us well in past crises.