According to the annual report of the supreme body of external financial audit, most of the external loans and grants were used last year to support the budget. In 2024, external state loans worth 18,117.7 million lei were disbursed, of which 10,549.6 million lei to support the state budget and 7,568.1 million lei to implement projects financed from external sources. However, the level of utilization of external credits was low, the document said.
The grant component of the external assistance was not much different in this sense, although its volume last year exceeded expectations (2,484.7 million lei), thanks to additional payments made at the end of the year. This included the third tranche of macro-financial assistance from the European Commission (96.4 million lei), as well as funds provided by the governments of the Czech Republic and Latvia.
However, compared to the previous year, the volume of grants given to the country decreased by 2,652.3 million lei, which represents a 48.4% decrease. About 71% (1,774.1 million lei) of the funds were used to support the state budget, while 29% (710.2 million lei) were used to finance projects implemented from external sources.
The decrease in the volume of gratuitous aid also did not remove the problems with its utilization at the level of central public authorities. Five of them did not utilize a single leu from the planned grants for 15 projects, which resulted in the non-utilization of about 108.9 million lei. Another eight public authorities recorded only partial disbursement of funds worth 43.1 million lei, with the disbursement rate ranging from 2.4 per cent to 79.1 per cent, the auditors said.
The problem with the low level of utilization of external credits for the implementation of investment projects is a long-standing one, overlapping with other problems and even violations of financial discipline. At the same time, the auditors reveal cases of “over-execution”: in some departments the level of external aid utilization exceeded the approved limits, amounting from 121.1% to 1473.7% (!). The Accounting Chamber does not name the “front-runners”, although it is not difficult to guess.
The situation is further complicated by the fact that the money already received but not utilized is deposited in the accounts of the “beneficiaries of aid” without being returned to the state treasury, and the amounts borrowed become a debt burden of the state budget. There is no consistency with the general budget rules in all this. And the principle of transparency of expenditures suffers. The annual immobilization of financial resources for an indefinite period of time, firstly, does not give an opportunity to redistribute the “unnecessary” money for other purposes. Legislation does not regulate the procedure for returning balances of funds, as a result of which unused balances of funds during the year are to be used in the next year. Second, the reporting procedures for subsidies and grants are far from perfect.
“In the period 2022-2023, from external loans and grants attracted from development partners, the State Budget Law approved allocations totaling MDL 4,103.1 million for national road repair and rehabilitation projects, of which MDL 2,720.5 million in 2022 and MDL 1,382.6 million in 2023. The rate of absorption of these resources was below the planned level, amounting to only 74.17% in 2022 and 80.96% in 2023. The absorption rate of external resources shows significant failures in the process of realization of road infrastructure projects.”
From the report of the Accounts Chamber
“The procedure for financing, execution and reporting by public institutions on subsidies and grants remains ambiguous due to the lack of a clear definition of these concepts and regulations. At the same time, clear and uniform distribution principles have not been established, which affects the transparency of expenditure execution, and the existing regulatory framework does not provide for detailed presentation of data on planned and reported indicators in accordance with budgetary and fiscal rules, which limits the possibilities of control by the founder and the Ministry of Finance”, – the report says.
Among the main reasons for delays in the absorption of external aid, the Accounting Chamber names the following:
- delays in the preparation of documentation required for donor evaluation;
- failure to fulfill in time the activities envisaged by the projects;
- untimely approval of financial documents, which led to postponement of payments to the next year;
- shortcomings in the organization of public tenders;
- in the case of four authorities, unused grants amounting to 2.6 million lei were returned to donors after the expiration of the implementation period.
The SP recommends SMART
The amount of external assistance is not guaranteed, but directly depends on the ability of public authorities to fulfill their commitments. In particular – budgets, timelines and the achievement of each project’s objectives. Failure to meet these conditions may result in reduced funding or even the loss of funds already allocated. This is happening all over the place.
Therefore, in addition to improving the regulatory framework and internal audit systems, the Accounts Chamber recommends to more actively implement performance indicators that fully comply with the SMART principles (specific, measurable, achievable, realized, relevant, time-bound).
Since the indicators used do not allow to accurately assess the progress of project implementation, the results obtained are difficult to quantify, which prevents effective corrective actions, the auditors believe, summarizing the results of the absorption of external assistance in previous years.
According to the official reports on external assistance provided to Moldova in the period 2022-2023, the international partners allocated funds to the country totaling 2,631.1 million euros, distributed as follows:
- 792.9 million euros (30.14%) – to finance investment projects;
- €1,220.5 million (46.38%) in the form of budgetary support;
- EUR 617.7 million (23.48%) in the form of technical assistance.
This distribution shows that almost half of the external assistance went directly to the state budget, about a quarter to institutional capacity building, and a third to specific investment projects.
The quality and pace of their implementation directly affect the availability of future external resources. This is the logic of donors.
|
Implementation of external grants in 2024. (mii lei) |
||||||||
|
Name |
Approved | Refined |
Implemented |
Achieved for the specified |
Implemented in the previous year |
Executed in the current year compared to the previous year |
||
|
(+/-) |
% |
(+/-) |
% |
|||||
| Total grants received, of which: |
2 395,101.3 |
2 382,653.4 | 2 484,699.2 | 102,045.8 | 104.3 | 5,136,988.7 | -2,652,289.5 |
48.4 |
| I. for support of the state budget, of which: |
1,906,950.0 |
1,714,920.2 | 1 774 140,0 | 59 219,8 | 103.5 | 4,456,658.2 | – |
– |
| ● from governments of other states |
– |
– | 8 620,4 | 8 620,4 | – | 17 195,0 | -8 574,5 |
50.1 |
| from international organizations |
1,906,950.0 |
1,714,920.2 | 1,765,519.5 | 50,599.3 | 103.0 | 4,439,463.2 | -2,673,943.7 |
39.8 |
| II. for externally funded projects, of which: |
488 151,3 |
667,733.2 | 710 559.2 | 42,826.0 | 106.4 | 680 330,5 | 30 228,7 |
104.4 |
| a. current grants |
248,083.3 |
418,913.1 | 418 254,5 | -658,6 | 99,8 | 304 229.0 | 114,025.4 |
366.8 |
| From governments of other states |
4 961,0 |
45,917.2 | 14,424.8 | -31,492.4 | 31.4 | 5,991.0 | 8 433,9 |
240,8 |
| from international organizations |
243 122,3 |
372,995.9 | 403,829.6 | 30,833.7 | 108.3 | 298 238.1 | 105,591.6 |
135.4 |
| b. capital grants |
240,068.0 |
248,820.1 | 292 304,7 | 43,484.6 | 117.5 | 376 101,5 | -83,796.7 |
77.7 |
| ● from other governments |
40.0 |
48 108,3 | 102,755.6 | 54,647.3 | 213.6 | 199 311,5 | -96 555,9 |
51.6 |
| ● from international organizations |
240,028.0 |
200 711,8 | 189,549.2 | -11,162.6 | 94.4 | 176,790.0 | 12,759.2 |
107.2 |
|
Source: Ministry of Finance |
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