New memorandum with International Monetary Fund crucial for Moldova, experts say

Chisinau, 3 August /MOLDPRES/ - The signing of a new memorandum with the International Monetary Fund (IMF) is crucial for Moldova, given that "the budget is affected practically on all components", said Expert-Grup Independent Analytical Centre experts at a news conference today. The government expects an IMF mission to arrive in Chisinau in the first half of September.

The budget may miss revenues worth 1.5 billion lei, as a result of a 21.7-per cent decrease in imports, said Expert-Grup Monetary sector and economic modelling Program Director Alexandru Fala. He added that "these failures in collections will be triggered, in particular, from the taxes on import activities. The largest amount will come from the value-added tax (VAT) on imports, respectively, over 1.3 billion lei, followed by excise duties and taxes on import. "

"The situation in the country is quite volatile; things are changing quite fast and have a quite big impact on the economy and, in general, on  the social situation in the country. What we can say is that the budget is affected practically on all components; the most important influence probably coming from incomes dictated by two factors: the cut in tax revenue caused by the reduction of imports and the second one - the cessation of external funding," said the Public Sector Economics, Finance, Management Programme Director Dumitru Budianschi.

He said the devaluation of the Moldovan leu and instability in the banking sector, which caused a number of other decisions, further worsened the situation. "The problems in the banking sector directly affect the budget", said Budianschi.

If the state guarantee is activated in next September and the state begins to serve this guarantee as part of internal debt, this year alone, the government will have to find 570 million lei more to service the public debt, estimated economic researcher Iurie Morcotilo. The domestic public debt service will also increase by 250-300 million lei this year due to higher interest rates on government securities, added the expert.

"If public debt now stands at 30 per cent of the Gross Domestic Product (GDP), then after the activation of the guarantee, it will increase up to 43-44 per cent of GDP in 2015-2016. The worst case scenario is for the debt to reach 50 per cent of the GDP in 2018, and slowly decrease by 2020", forecast economic researcher Iurie Morcotilo.

Prime Minister Valeriu Strelet signed a letter to the International Monetary Fund on 31 July, asking for an IMF mission to be urgently sent to Moldova. According to the prime minister, "the mission will negotiate with the Chisinau-based authorities a new loan agreement for Moldova, given a well-marked budget deficit".

“If we don’t want to miss financial assistance, budgetary support, enabling us to continue capital investment in infrastructure, which means jobs and wages, then we will have to accept bitter medication, prescribed by the IMF”, said the prime minister in an interview for the site adevarul.ro. "Certainly, the government's mission is to reach a compromise with the Fund, in order to protect the socially vulnerable categories, so that they do not reach an extreme limit of poverty," said Valeriu Strelet.

(Reporter V. Bercu, Editor L. Alcaza)