Alexander Muravsky
The first thing that the experts drew attention to was the budget adjustment at such an early date. Usually, changes to the budget are made by the end of summer – early fall, when the situation in the economy becomes clearer and conclusions can be drawn about the possibilities of budget execution. This year, two rectifications have already been made. However, the haste in this case is understandable: it is caused by the inclusion in the budget of the first tranche of EU support totaling 1.8 billion euros. According to the signed agreements, the first transfers should already be made.
The money will be used to cover the budget deficit. We have no other sources for this. According to the EU criteria, the deficit in all countries, including candidates for accession to the union, should not exceed 3% of GDP. Because of this, the member countries of the union can cut funding. In the EU, this rule was waived when the pandemic started, because the budgets provided support to those affected by the lockdown.
But even now in Romania, for example, this threshold is not respected. The budget deficit there reaches 5-7% of GDP, experts say. And Moldova is already exceeding these norms.
In principle, it is not a catastrophe, if other parameters are observed, experts say. If the deficit is formed from one-time expenses for a large investment project, it is one thing. Another is permanent expenditures to cover current needs. Compensations, salaries, pensions, because even today they are almost entirely paid from the state budget, because the social insurance budget is deficit.
The second case is an extremely negative factor. It will constantly increase the budget debt, if no measures are taken – to reduce expenditures and increase revenues. In addition, the deficit can be reduced artificially by including a grant in the revenue side. And grants are impermanent and depend on the fulfillment of various conditions, as well as other factors.
“Moldova needs sources to cover the deficit,” says former Deputy Prime Minister and Economy Minister Alexandru Muravschi. – And they are there for now, thanks to the expected tranche. Because relying on internal sources, for example, from the sale of state securities to commercial banks is a dangerous practice. The interest rates paid to banks by the state are much higher than those we receive from external creditors. Plus, the European Commission gives us funds for 40 years. And we borrow “short” money from banks. They buy government securities for 91 days, 182 days, a year, and we actually place securities to pay off our debts on interest. It is clear that this source is also needed, but it is less reliable and unprofitable”.
At the same time, due to the increase in expenditures, we are increasing the budget deficit. That is why it is so important to use the funds wisely, he emphasizes. “According to the plans presented by the government, it turns out that about a quarter of the funds from the EU will be used for investment expenditures, while the rest will cover the budget deficit and solve the current tasks of the government,” continues Alexandru Muravschi. – We all, our society is in a bifurcated state now. Because we need to raise wages and pensions, we also need compensation for energy resources. Small and medium-sized businesses need to be supported, including grants. All this is necessary and undeniable. But the question is how to present it without politicizing it. It is necessary to realize that from the moment the money came to Moldova, it is the state budget, and it is a national budget. Especially since all Moldovan citizens will pay for the loans later”.
