Moldova faces threat to economic, social security - report

Chisinau, 10 July /MOLDPRES/- Moldova has been facing the greatest challenges on its economic security since 1991, according to a report launched by the Expert Grup centre jointly with Friedrich-Ebert-Stiftung Foundation.

"The risks are both internal, related to political instability, corruption, vulnerability of banking sector, and external, caused by the economic crisis from Ukraine, Russia, security crisis from Ukraine, trade restrictions presenting serious threats to security of the country, the centre's executive director Adrian Lupuşor said.

Under the report, the vulnerabilities might be easily mitigated if the government proved transparency and efficiency in building the economic and social security of the country. According to the experts, the crisis in the banking system was the basis of the economic problems faced by the country at the moment. Frauds amounting to about 12 per cent of GDP committed in 2013-2014 by the three banks could be avoided by the National Bank of Moldova (BNM) and other relevant institutions.

"The problem is that besides the crisis faced by the three banks, the factors causing the crisis have not be removed, so that there is possibility to repeat such scenarios in the future", he also said. 

The experts noted that in the conditions, the signing of a memorandum with the IMF was very important both "for monetary reasons" and to boost structural reforms. They recommend to make an audit of public institutions, especially of the regulation ones. The report's authors believe that the three banks should be liquidated.

The advisor to the governor of the BNM, Andrei Rotaru, described exceeding the BNM's target limit of 5 per cent ± 1.5 percentage points as a shock. The inflation rate reached 8.1 per cent, and in 2016, is estimated at 6.4 per cent. Tightening measures of monetary policy, by increasing the basic rate and compulsory reserves in national currency, will lead to reducing inflation, he said.

Touching upon the Moldovan leu depreciation, Rotari said he would like the issue be analysed by inputs and outputs of foreign currency from Moldova. "We are in a difficult situation, when we have a decrease both in import and export, a drop in remittances, whereas the demand for currency has remained high", he noted. He added that this had been the main factor influencing the depreciation of national currency and respectively, higher inflation.

International Monetary Fund's Resident Representative in Moldova Armine Khachatryan pointed out that the business model in Moldova "must be restored and revised", and the banks should review portfolio of risk. 

(Reporter V. Bercu, editor M. Jantovan)