Volodymyr Golovatyuk
“Lord of the Ring”
The National Bank’s decision of February 5, 2026 to reduce the mandatory reserve requirements is primarily aimed at increasing liquidity in the banking system, as the regulator itself explains its decision. Following November 2025, this is the second attempt of the NBM to “push” the banks to be more active in lending to the government and the economy. And it is not unsuccessful. Only loans to the Moldovan economy are “pulled” by the government.
The situation when the economy, based on loans, creates conditions in the form of providing more liquidity to banks for lending to the government, affects the fundamental mechanism of operation of the modern financial system of Moldova. It is a rather complex knot, where the interests of the state, commercial banks and the requirements of international partners are intertwined. The mechanism of “looped liquidity” can have very sad consequences for the economy, experts warn.
According to economist Vladimir Golovatiuc, when the economy does not provide the government with the necessary resources, but wages, pensions, and various compensations must be increased, and roads must be repaired, the only way out for the government is to borrow. And they borrow both inside the country and abroad. As a result, debts are growing, putting a heavy burden on the budget, which is already “suffocating” from their servicing and the need to surgically direct financial flows to the real “European integration” economy and the fulfillment of social obligations.
Why is this critical for the economy?
A specific model has developed in Moldova, when excess liquidity of banks does not go to the real sector of economy (business, production), but is directed to financing the state deficit. Most of the loans are not used for capital investments, but to cover current budget expenditures: social payments, salaries to public sector employees and servicing of old debts.
This creates dependence on imports, including money. After all, the money that enters the economy through government spending stimulates consumption. Since Moldova produces little, this money immediately goes abroad to pay for imports, increasing the trade deficit.
The debt service trap is no less dangerous. The more the state borrows domestically at market interest rates, the more budget funds will be spent next year just to pay interest, not to develop medicine or education.
Financial pyramid of loans
The situation when both the deficit of the current account of the Balance of Payments and the lack of own funds in the state budget are covered by borrowed funds resembles a financial pyramid, says Vladimir Golovatiuc.
“More and more of the new loans from abroad are used to repay earlier loans. In 2025. 64% of new loans went to repay old loans, in 2024 – 33%, and in 2021 – 27%. This is an interesting financial pyramid scheme!
In 2025, the government received $715 million in loans from abroad, 80% of which came from the EU, including from the European Commission, the European Investment Bank and some European countries (France, Germany, Estonia and Slovakia).
Moldova’s main foreign trade imbalance is with the EU – imports for 11 months of 2025 exceeded exports 2.3 times, although a year ago – 1.8 times.
The main creditor of the government since 2021 is the EU. And almost half of the loans taken from the EU since then, including individual countries, are used to repay loans previously received from them.
Probably, the EU gives loans to the government not because it really supports Moldova, but so that the government could repay the loans it received earlier, and Moldova could buy their products from EU countries. In other words, it promoted not Moldovan exports, but imports from the EU,” the expert wonders.
Liquidity looped to the government
The change in the position of the NBM, which previously supported in every possible way high norms of required reserves to curb inflation, “froze” so to speak huge reserves of money at banks, and now has put them “on unfreezing”, looks more than transparent. The government needs money. And a lot of money.
And the financial sector is not “unfrozen” yet, although SS is an ideal asset for it: the risk is zero (the state will always pay in lei), and the yield is often higher than on loans to the real sector. And only the central bank can push banks to activity.
“The fact is that, since July 2025, the demand from kombanks was lower than the offer of the Ministry of Finance on the sale of government securities,” explains Vladimir Golovatiuc. – In general, in the second half of the year the ratio amounted to 77%. As a result, the Ministry of Finance failed to sell SS worth about 9 billion lei. Thus, the government is facing a serious problem – the lack of demand for government securities in the full volume of the Ministry of Finance’s offer. The seriousness of the problem is related to the fact that the approved state budget for 2026 stipulates that out of 21 billion lei of the state budget deficit, 10 billion lei is expected to be obtained from the sale of government securities, after the redemption of previously sold government bonds. Let me remind you that in 2025, net sales of government securities amounted to only 8 billion lei”.
A “safe haven” or a “debt quagmire”?
Government securities as a “safe haven” for banks’ liquidity is certainly a good thing … for the well-being of the banks and the ability of the executive branch. Nothing more! Consumption instead of development!
Many experts note that such a model is “convenient” in the short term: it maintains currency stability and allows the state to fulfill its social obligations. However, it does not create added value. Without reorienting lending to production, the economy remains hostage to external injections and internal borrowings.
Moreover. The Crowding out effect is dangerous for the economy. When the government actively borrows on the domestic market, it “vacuums up” the available money. As a result, businesses get loans either at inflated rates or not at all, because it is more profitable and easier for banks to lend to the government.
“Unlike in previous years, the main increase in government debt in 2025 was due to domestic borrowing. The total state debt grew by 11.4 billion lei in 2025, of which the domestic one by 8 billion lei (71% of the total increase) and the external one by 3.4 billion lei (29%). So, external partners do not trust the Moldovan government as much as they used to,” the expert said.
As a result – stagnation, debt spiral, or the need to take new loans only to repay the interest on the old ones, and dependence on banks.
The banking system becomes critically dependent on the solvency of the budget, not on the success of the economy. The ring is closed.
