Dependence on Donors
Moldova’s budget is heavily dependent on external grants and loans from the EU, the World Bank, and other partners. Delays in disbursements or protracted negotiations on new programs create temporary gaps between planned expenditures and actual foreign currency inflows.
As reported by LOGOS PRESS, in the first half of 2026, Moldova’s state budget deficit grew by 21% and reached 9.21 billion lei (about 5% of GDP) compared to 7.61 billion lei during the same period last year.
The chronic shortfall in revenues relative to budgeted expenditures is directly linked to the catastrophic decline in external grant receipts and European aid tranches. This brings us close to a renegotiation of the terms of the “cashless” program with the IMF. Europe itself is currently short on funds, given its aid to Ukraine and the unfolding energy crisis.
The government’s response: Budget cuts and optimization
Since the annual budget deficit for 2026 was originally planned at 20.9 billion lei, and foreign aid is being delayed, the government began implementing strict spending cuts this summer.
We have already highlighted that reforms are being put on hold: the implementation of the new law on public sector wages has been postponed until the end of the year, and government agencies are reviewing non-essential expenditures. At the same time, the Ministry of Finance is seeking unused domestic reserves, in particular through audits of the social protection and healthcare sectors.
“Since the beginning of the year, the government has borrowed 10.1 billion lei. That’s a lot! However, when compared to the public debt parameters set in the 2026 state budget, the authorities are facing serious challenges in securing new loans,” notes economist Vladimir Golovatyuk. – It is projected that total public debt will increase by 23 billion lei over the year, including a rise in domestic debt of 11 billion lei and external debt of $400 million. Over the past seven months, the actual increase in total public debt amounted to 10 billion lei (5.3 billion lei and $45 million, respectively). So, the main problem lies in securing loans from abroad. Are our partners really letting us down?”.
How the authorities are closing the gaps
Foreign grant receipts over the past six months have fallen by a factor of 7.5—to a modest 370 million lei, compared to 2.13 billion lei during the same period last year. Expensive domestic resources—borrowing and cuts to social programs—are now being used to cover the deficit.
To finance the cash shortfall, the Ministry of Finance had to shift its focus to the domestic market. Domestic sources (government securities) provided 8.55 billion lei (the lion’s share of which came from expensive commercial loans within the country).
External sources contributed only 2.37 billion lei to the treasury. The change in the balance (reserves) amounted to minus 1.71 billion lei (withdrawal of balances from accounts).
“In April–June, state budget revenues decreased by 300 million lei compared to the corresponding period in 2025. At the same time, expenditures did not decrease.
This was achieved by drawing down funds from treasury accounts, which totaled 12.5 billion lei at the beginning of April and were reduced by 5.3 billion lei over three months. “There are still funds remaining there (7.2 billion lei) that can be used as needed,” said economist Vladimir Golovatyuk, taking a look into the government’s coffers.
The national debt won’t pay itself
The government has no choice but to turn more aggressively to the domestic market for borrowing, allow educational institutions to allocate the revenues in their accounts on their own (I wonder which ones) and continue to pay off the state’s debts on time—both domestic and, especially, foreign. Otherwise, the “financial pyramid” will collapse, with predictable consequences.
The Ministry of Finance is stepping up the issuance and sale of government securities (government bonds and bills) on the domestic market, borrowing funds from commercial banks.
The Treasury will temporarily use cash balances in its accounts to cover priority protected expenditures (salaries, pensions, and social benefits).
Domestic borrowing is more expensive than external concessional loans, which increases the burden of servicing the national debt. This debt is growing by the hour, reaching 57.8 billion lei, having increased by 426 million lei in July.
According to the economist’s observations, the slight increase in domestic public debt in July (a total of just 426 million lei) is due to the fact that only one auction for the sale of government securities was held in July, at which 2.9 billion lei worth of government bonds were sold, while the Ministry of Finance’s offer totaled 3.1 billion lei.
In other words, demand for government securities also amounted to 3.1 billion, but was simply cut off due to higher yields—that is, it fully covered the government’s request. “The Ministry of Finance is thus seeking to prevent an even greater increase in yields, which has been evident in recent months,” says Vladimir Golovatyuk.
Debt service costs are rising disproportionately
Domestic debt servicing costs increased 1.9-fold in the first six months of 2026 compared to January–June 2025. Meanwhile, spending on salaries for public sector employees rose by only 2.3%. In absolute terms, the increase amounted to 1 billion lei for debt service and 150 million lei for salaries, respectively.
As a result, the Ministry of Finance faces a dilemma: either increase sales of debt securities or curb the rise in their yields, says the economist. The Ministry of Finance chose the latter.
“The main thing is that the proceeds from the sale of government securities are sufficient to redeem previously sold government securities,” Golovatyuk believes. He adds that, thanks to domestic public debt, the government has secured an additional 400 million lei to finance budget expenditures.
External Accounts
The situation is different with external debt.
Since Europe has begun to “cut back” on Moldova, $9 million in external loans had been received by mid-year, while $13 million in repayments had been processed.
Nevertheless, due to the depreciation of the dollar against the euro, the dollar amount of the debt increased by $19 million, totaling $4.856 billion. However, as a result of the depreciation of the national currency, the lei-denominated amount of external debt decreased by 334 million lei, totaling 85.1 billion lei.
As a result, total public debt rose by 92 million lei over the month, reaching 142.9 billion lei, according to the expert’s calculations.
However, the budget received nothing from external borrowing. Moreover, the additional resources generated by domestic borrowing decreased by 70 million lei.
In other words, as a result of borrowing overall, the budget received only 330 million lei in July. Given the situation with current budget revenues in recent months, this is a “drop in the bucket.”
