Iryna Roshka
Victoria-bank acted as a financial intermediary for the project. Expert and organizational assistance to the local authorities in issuing bonds was provided by the independent center Expert-Grup. The Embassy of the Kingdom of the Netherlands in Chisinau undertook the additional costs of the project preparation.
According to Irina Rosca, the vice mayor of the municipality, when presenting the project in the capital on September 3, this year, roads with a length of 2.4 km in 11 streets will be repaired with borrowed funds. The sum of the issue will amount to 3 million lei.
This is the fourth infrastructure project realized in Moldova with the use of such a financial instrument. Earlier, it was successfully applied in the cities of Singera, Ceadir-Lunga and Chisinau. Municipal bonds or debt securities of the City Hall are used to finance capital investments (road infrastructure, water supply and sewerage, repair of public buildings or purchase of equipment with a long service life) or to refinance the debt incurred during their realization.
The issue is carried out only in the national currency. The Ministry of Finance and the National Financial Market Commission, the state bodies responsible for finance and the capital market, are involved in the issuance process, which significantly reduces the risks of such projects.
Bonds are issued at par value, with fixed or floating interest rates and with maturities of several years. In the case of the municipality of Sirec it is two and three years using fixed rates of 8.75% and 9%, respectively. They are considered by local authorities as an additional tool for investment. At the same time, it is cheaper than bank loans and SS. At the same time, investors also do not lose because of the currently valid lower rates on bank deposits and government securities.
According to Ion Gumene, State Secretary of the Ministry of Finance, municipal bonds are not only and not so much a capital market instrument, but also a tool for the development of local financial autonomy, especially in the context of almost complete dependence of local budgets on transfers from the state budget. It is used by both local governments and citizens to finance projects they consider to be priorities.
Publicity and transparency of the process are important for the issuance of bonds, as well as keeping the level of debt to the national public budget below the norms set by the Ministry of Finance. In Sirec, there are no debts and the level of own revenues is currently 10.4% of the local budget revenues.
Vice Mayor Iryna Roşca told Logos Press that about forty economic entities operate in the commune, one of the largest in the republic, which is larger in number of inhabitants than some district centers. Several companies export agricultural products, both fresh and processed. They grow fruit (peaches, apples, cherries and cherries), process plums and walnuts, and produce seedlings.
As a result, transfers from the state budget to Sirec are recorded at 79.5%. This is a good result compared to many other localities in the country. The rest of the commune’s budget revenues are grants and loans provided to local authorities within the framework of projects. The Mayor’s Office has established a department for investment attraction, which employs four specialists.
At the moment, the municipality is implementing 22 projects at the national and international level. Thanks to this, the local budget is constantly growing. Today, it amounts to 56.8 million lei.
In accordance with the legislation in force in Moldova, today municipal bonds of general type are issued, i.e., repayable from the local budgets, although there are other types of bonds on the capital market. NCFM together with the Ministry of Finance is preparing a legal framework to expand the scope of this instrument.
Representatives of the community of mayors are also interested in it, noting that it requires more publicity, advertising and financial preparation. Everything depends on the needs and willingness of the mayoralties. Municipal bonds are currently a good option for financing small projects. They are cheaper than bank loans, and when compared to projects, projects can be more profitable with a grant. At the same time, grants do not cover all project costs, and if the mayor’s office needs to find funds for co-financing, it can issue bonds for this purpose.
Today, many mayoralties, Siretz included, use residents’ funds for small projects by contributing their share. This is also a solution, but securities are a less risky instrument. In such projects, the financing process is clearer and more controllable. At the same time, the mayors emphasize that the state could also encourage local authorities to turn to this instrument, covering at least a small part of the necessary funds.
As it was mentioned during the presentation, the growth of investments in infrastructure, along with the proximity of the municipality to the capital, have caused the real estate in Sirec to double in value.
It should also be noted that from 2025 in Moldova there is an exemption from tax on income of resident individuals received as interest on SS and/or bonds issued by local governments. And from 2026 this exemption will be extended to non-residents as well. That unambiguously increases the attractiveness of these instruments.
