Connect with us
"
"

Economy

The state budget for the next year includes a deficit of 7 billion lei. Why this could be a problem?

Published

on

On November 27th, the Government of the Republic of Moldova approved the draft budget for the next year. The document displays revenues of over 44 billion lei and expenditures of 51 billion lei. Thus, a budget deficit of 7.4 billion lei was calculated, whereas a lower amount- 6.1 billion lei – was previously presented at the meeting of the National Commission for Collective Consultations and Negotiations on November 25th.

Assurances vs doubts

“The budget deficit difference of 1.3 billion lei is the equivalent of an eventual investment loan for the development of road infrastructure,” explained Minister of Finance Sergei Pușcuța. The minister explained that the deficit will be financed by loans on the internal market, issuance of securities ​​and privatisation of public assets, yet he didn’t provide too many details about it. “The real budget deficit is 2.6 billion lei only,” added Pușcuța.

The internal state debt is expected to not exceed 25.7 billion lei, and the external state debt is forecasted to be 41.8 billion lei at the end of the next year, according to the projections made by the Ministry of Finance.

On the other hand, former Minister of Finance Natalia Gavriliță criticised the decision of the current Government, saying that it is taking irresponsible actions. “The Government increased overnight the state budget deficit to 7.4 billion lei, or 3.25% of GDP. The draft budget was approved without the Government publishing the annexes or the informative notes to the budget. The Minister of Finance avoided to specify how this deficit will be financed. These decisions, which will affect our country in the coming years, are taken with maximum irresponsibility,” the former Minister of Finance said.

The main public expenditures

The main focus of the future public expenditures are investments in infrastructure, creating jobs and increasing people’s well-being, according to an official statement made on the Government official page. That is why, a series of social projects and expenditures were approved, such as granting an unique support for people that receive a low level of pensions and allowances, increasing the cold weather allowance, pension indexation for former military corps, etc.  “We are a Government that is focused on people. That is why we came up with these projects. There is financial coverage for these projects,” said Prime Minister Ion Chicu. The coverage, as the head of Government mentioned, will be provided from the estimated difference in social security revenues, which are expected to be 2 billion lei higher than the revenues in 2019.

Money from abroad

Next year, the Government expects to receive more than 8 billion lei from abroad, according to the annex to the state budget, prepared by the Ministry of Finance, out of which 109.7 million lei in the form of grants received from other states’ Governments, 1.6 billion from donations received from international organisations and 6.3 billion lei from foreign received loans.

At the same time, the US Ambassador to the Republic of Moldova, Dereck J. Hogan, emphasised that external partners want to see a Government implementing reforms, otherwise the country will be lacking financial support. “The PSRM-ACUM coalition had more potential to implement the necessary reforms. Now we expect this to be done by the current Government. […] We want the current Government to continue implementing reforms in the same way. External partners insist on continuing to implement reforms. If external partners, including the US, will not see progress, of course we will stop funding,” the ambassador said.

“Moldova has now a new government, and the need for genuine reforms remains,” stated Federica Mogherini during a speech at the European Parliament Plenary debate on eastern neighbourhood developments. So the external source of financing for Moldova remains conditioned and, therefore, is not certain.

World Bank projections

According to the World Bank economic projections for the Republic of Moldova, the budget revenues was going to reach 29.5% of GDP (66.25 billion lei), while the budget expenditures was going to represent 31.6% of GDP (70.97 billion lei) in 2020. Consequently, a lower budget deficit was expected – 4.72 billion lei. The public external debt was forecasted to raise to 146.43 billion lei, as compared to its actual value of 122.74 billion in 2018. Thus, it is not clear yet how the Ministry of Finance calculated the value of 41.8 billion lei for the state external debt  and whether the values included in the state budget, as well as the Government promises to cover the budget deficit reflect the reality.

Next, there draft budget law will be examined in up to 3 readings in the Parliament, based on an explanatory statement of the Government and the reports’ presentation by specialised committees.  If it’s the case, the necessary changes will be made and the state budget law will be adopted.

Society

What is the Moldovans’ budget share spent on food? Comparative figures

Published

on

While most of the European countries’ population spend not more than a quarter of their minimum wage on food, Moldovan people allocate 50,1% of it on food expenditures, estimated a study conducted by Picodi.com.

The analysts compared food prices with the minimum wage, by creating a ‘shopping cart’, which included eight basic products designated to cover the daily nutritional needs of an adult: bread, milk, eggs, rice, cheese, meat, fruit and vegetables.

The total estimated value of the included products was 1034 lei, representing 50.1% of the net minimum wage in Moldova – 113 euros. In comparison with Moldova, the lowest minimum wages in the EU countries are in Bulgaria and Romania – 242 euros and 282 euros respectively, Bulgarians and Romanians spending 23,4% and 29,5% of their minimum wage value on food. At the same time, such countries as Luxembourg and Ireland have settled their minimum wage level among the highest in the EU – 1796 euros and 1574 euros per month respectively, the food expenditures in these countries reaching  only 9,5% and 7,3% of the minimum countries’ budget.

According to the national statistics of Moldova, provided by the National Bureau of Statistics (NBS), the monthly average wage earning in 2018 was 5141.9 lei (about 250 euros at that moment), that being 12% more than in 2017. Also, the consumer price index (CPI) for food products amounted 107.5% in December 2019, as compared to December 2018, while in December 2018 the CPI marked 100.9%, as compared to December 2017.

The same source shows that the average monthly expenditure budget of the population of the Republic of Moldova in 2018 was on average 2407.9 lei per person (117 euros), increasing by 7.0% compared to the previous year. In real terms (with the adjustment to the consumer price index) the population spent on average 3.9% more in 2018 compared to 2017.

The national statistics prove the same thing: most of the Moldovans’ expenses are designated for food purchasing – 43.8%, being followed by the maintenance of the house expenses – 18.2% of the total consumption expenses, clothing and footwear – 10.7%, health services – 5.1%, communications – 4.6%, transportation – 4.0%, housing – 3.8% and education – 0.5%.

In addition, almost 40% of the population of the Republic of Moldova said that their income is only enough for their basic needs, while 24,3% said that the money they earn are not even enough for the basic needs they have, as a survey conducted by the Sociologists and Demographers Association displayed. The biggest concerns of Moldovans are poverty (25,8%), unemployment (23,1%), migration (21,3%) and corruption (19,2%).

Photo: Rob Maxwell |Unsplash

Continue Reading

Politics

Moldova in the last decade// the most prominent political fiascoes the country experienced

Published

on

The decisions taken by the Constitutional Court, the expulsion of Turkish teachers, the adoption of the mixed electoral system, the president removed from office “for 5 minutes”, the lack of Government or the doubled Government – there were so many failures in the Moldovan politics in the last 10 years, that it’s hard to count them.

During the last ten years, the citizens of the country have witnessed many changes of the political and state institutions. Moldova.org selected the most relevant events. Here is where we can remember the saying “Every nation has the leaders it deserves.”

1  Decisions of the Constitutional Court from 7 to 9 June 2019

The Constitutional Court of Moldova (CC) announced, on June 7, that the deadline for the Parliament, which was elected on February 24 and validated on March 9, to appoint the new Government expired. The CC calculated that the constitutional term of “three months” provided for the formation of the Government actually means “90 days” and that it expired on June 7, not on June 9. The next day, the political bloc ACUM and the PSRM signed a temporary agreement for the formation of a majority government, Zinaida Greceanii being voted the president of the Parliament and Maia Sandu being appointed the head of the Government.

Immediately thereafter, the CC declared all the laws and decisions adopted by the new Parliament as unconstitutional. On June 9, the Constitutional Court decided to remove President Igor Dodon from office and appointed Pavel Filip as the interim president. After the Democratic Party announced its power withdrawal, on June 15, the CC cancelled its own previously taken decisions.

The Venice Commission published an opinion, stating that the CC violated its own procedures when taking the respective decisions, but also the principle of impartiality towards the political parties. The Commission recalled that the Court’s role is to be equidistant and to act as an impartial arbitrator in the event of a confrontation between political parties.

2 The period of two Governments

Between June 8-15, 2019, the Republic of Moldova had two Governments – the Government appointed by the newly formed majority government, led by Maia Sandu and the previous Government who still remained in power, according to the decision of the CC. Pavel Filip, the so-called interim president, announced the dissolution of the Parliament and the date of future snap elections.

The newly elected Parliament had its first session in the dark, as the technical employees of the building did not come to work that day. The democrats stated that they did’t recognise the new Government and didn’t intend to give up the power. The democrats’ leader Vladimir Plahotniuc accused the socialists of trying to usurp power. A week later, the Democratic Party decided to give up the power in favour of the Government appointed by the ACUM and socialists’ majority.

3 Clandestine interceptions’ scandal

A RISE Moldova investigation has discovered an entire operation of intercepting and chasing the political opponents of the democratic government, which has been carried out in recent years. The operation was carried out under cover of three criminal cases, filed because of inconvenient Facebook messages or statements at press conferences. As a result, it was established that the activities of 52 people, including politicians, representatives of civil society, organisations representatives and journalists, were investigated by prosecutors and police officers.

After coming to power, the ACUM representatives declared that the number of people chased by the former government was much higher. In addition to intercepting phone calls, some of them have also been monitored, as microphones and video cameras were installed in their houses. President Igor Dodon claimed that, in 2018, there were 10 thousand interceptions, out of which 600 at the request of the Information and Security Service (ISS), and 3 300 interception in 2019, out of which 200 were initiated at the request of ISS. Most interceptions were initiated by the Ministry of Internal Affairs (MIA). Based on the interception scandal, criminal cases were filed against four MIA employees, three prosecutors and four judges.

4 Camouflaged expulsion of Turkish teachers

On September 6, 2018, seven Turkish citizens who were teachers at Horizon High School, were removed from their homes by employees of the ISS and taken in an unknown direction. The state institutions declared the action as “expulsion”, saying that the Turkish nationals were suspected of links with an Islamist group. They have been declared undesirable by the competent bodies and expelled from the territory of the Republic of Moldova.

The Turkish citizens were taken to Turkey by a charter plane and were sentenced to years of imprisonment. Immediately after the expulsion operation, European officials asked the Moldovan authorities “to comply with the rule of law and all judicial procedures” in this case. On June 11, 2019, the European Court of Human Rights issued a conclusion stating that Moldova violated the rights of Turkish citizens and required the government to pay 25 thousand euros for each of the Turkish citizens, whose rights were violated.

5 Cancellation of Andrei Nastase mayoral mandate

In June 2018, the Chișinău District Court cancelled the results of the snap local elections for the mayoral seat of the capital city. The elections were won by the Dignity and Truth Platform Party leader, Andrei Năstase. His mandate was not validated on the grounds that he would have campaigned on social media on the day before elections. Andrei Năstase addressed voters on Facebook and advised them to participate in the vote.

The decision was heavily criticised by local experts, ambassadors and representatives of international forums. The decision remained in force and after being challenged in the higher courts. After one year and three months, the mandate of Andrei Năstase was validated. By that moment other local elections were organised and his rival, socialist Ion Ceban won the mayor seat.

6 The Citizenship by Investments Law


Also in 2018, the Parliament adopted the law on granting citizenship by investments – a mechanism by which foreign citizens could obtain citizenship of the Republic of Moldova. “The Law on Citizenship by Investments of the Republic of Moldova is one of the projects that created favourable conditions for international money laundering,” Transparency International-Moldova states in a report. Such models for granting citizenship are criticized by European officials, and some countries have already given up these programs. In the summer of 2019, the Government instituted a moratorium on this law for a period of four months.

7 The president removed from power “for 5 minutes”

In 2017, the Constitutional Court decided that the president’s refusal to carry out his constitutional duties in appointing a minister represented “a temporary impossibility to exercise his duties” and justified assigning the president of the Parliament or the prime minister as the interim head of state. In other words, the CC decided that the president Igor Dodon had no veto in appointing a minister, and the signature of the head of state on the confirmation decree is only a formal one.

In the period of 2017 to 2018, Igor Dodon was temporarily removed from office for five times, and the respective decrees were signed by the President of the Parliament Andrian Candu. The removal for “five minutes” became a joke of the representatives of civil society and experts who stated that Igor Dodon may claim to be included in the Guinness Book of Records. In December 2018, Igor Dodon stated that he had called for protest in case another removal from power would have taken place.

8 The adoption of the mixed electoral system

In the summer of 2017, the Parliament adopted the law on the mixed voting system. It provided that 50 deputies would be elected on party lists, and 51 – directly by citizens, in single-seat constituencies. The mixed voting system was adopted by the socialists, democrats and popular-Europeans and has been criticised by the Venice Commission, the European Union, the United States and by the political opposition.

After the formation of the new majority government, the Parliament adopted, in the summer of 2019, the return to the proportional representation system, cancelling the mixed voting system.

9 The appointment of the Government led by Pavel Filip

On January 20, 2016, the Parliament where the democrats held the majority, granted a vote of confidence to the candidate Pavel Filip and his Cabinet of Ministers. At that time, neither the draft Government activity program, nor the list of proposed Government members had been made public. The new Government was voted in a session that lasted about 30 minutes, in which the designated PM held a speech for 8 minutes and, in another 2 minutes, presented the Executive’s list. The discussions and debates were omitted.

Moreover, the procedure for taking the oath by the members of the Government also took place on January 20, secretly, at midnight. Thousands of protesters surrounded Parliament, calling for snap parliamentary elections. Subsequently, the protesters entered the Parliament building forcefully, and altercations took place.

10 Ilan Șor became the mayor of Orhei

Being criminally investigated in the “Theft of the century” case and being arrested at home, on June 14, 2015, Ilan Shor won the mayoral elections with 61.97% of the votes. Political analysts described his involvement in politics as an intention to escape house detention.

In 2017, he was sentenced by the first court to 7 and a half years in prison. Despite the accusations, Ilan Șor pleaded not guilty and continued his political activity . Moreover, he also obtained a mandate as a member of the Parliament. In 2019, he received the certificate of integrity to run for parliamentary elections. Later on, Ilan Şor left the country despite the court ban, after the democrats’ power withdrawal.

11 The theft of the century


In 2014, the Republic of Moldova became the scene of an international scandal, following a fraudulent scheme of 1 billion withdrawal from 3 saving banks from Moldova. To save the situation, two governments (led by Iurie Leancă and Chiril Gaburici) took decisions to grant state guarantees for covering the hole in the banking system. To investigate the case, Kroll company was invited.

At the initiative of the political bloc ACUM, a new parliamentary commission was created in order to investigate the banking fraud. It’s conclusions were that the amount of damage could be much higher than initially stated and that the main beneficiaries of the bank robbery were the Vladimir Plahotniuc, Ilan Șor and Vladimir Filat groups.

12 The stolen billion has to be paid by Moldovan citizens in the next 21 years


In 2016, the Government led by Pavel Filip decided to convert the emergency loans, amounting to 13.5 billion Moldovan lei, transferred by the National Bank of Moldova to three affected by the robbery banks, into state debt. Therefore, the citizens of Moldova would have to return in the next 25 years about 21 billion Moldovan lei (including the interest for the emergency loans). It was calculated that every child born in the Republic of Moldova would owe the state 4000 lei (182 euros) from the first day of his life.

13 No president, for almost three years

In 2009, when the former head of state Vladimir Voronin announced his resignation, the Parliament tried twice, but without success, to elect the democratic leader Marian Lupu to this position. In November 2010, due to Parliament’s inability to elect the head of state, snap parliamentary elections were held again. Finally, in March 2012 the candidacy of the former president of the Superior Council of Magistracy, Nicolae Timofti, was voted to be the president. Therefore, the constitutional crisis lasted for about two and a half years (from September 2009 to March 2012).

This text is a translation. The original article can be found here.

Photo: privesc.eu

Continue Reading

Economy

The Chicu government was criticised for its intention to introduce taxes on digital giants. Expert’s opinion

Published

on

The Government of Moldova led by Ion Chicu was criticised for the proposal of Ministry of Finance, made after the draft state budget for 2020 was made public, to oblige multinational digital companies such as Facebook, Google, Apple, Amazon, Netflix or Airbnb to register legal entities in Moldova and pay VAT on the revenues they earn from Moldovan users.

However, “going alone against the companies that rake in colossal revenues by any standards can undermine the efficiency of the whole enterprise and even affect our relationship with the United States,” it is opinated in a study, which has Vladislav Kaim, the member of the UNCTAD Youth Network and a master student in Economics at Lund University, as the author.

According to the Ministry of Finance estimations, such measures of taxation would bring additional 100 million lei in the state budget. Still, the experts community, political opposition and public reacted rather sceptically and, as a result, the Government had to postpone the entering of the decision in force from 1 January to 1 April, as it is mentioned in the study.

In the context of a union-wide digital services tax, which is aimed to be implemented by the EU in 2020, but also the disagreements between countries with different interests, “Moldova as a small market with no current stake in the future of digital economy even more so cannot afford to act unilaterally,” claimed Kaim.

“The presence of Google, Facebook and other digital giants in the life of Moldovans is ubiquitous. Thus, it is the duty of the government to make sure that our citizens get a fair deal from it, but unilateral measures imposed by a small and one of the poorest countries in Europe against the behemoths who thrive on effects of scale an global reach have a very limited potential of achieving that. Their potential impact on our relationship with the US should also be considered.”

The expert suggested two more strategies for the Moldovan government to choose from, instead of going alone against digital giants without leverage. First, to delay the adoption of the new tax until January 1, 2021, until the EU would establish a permanent solution. “Thus, the Moldovan digital taxation regime will match the one of the biggest single market in the world, which can generate beneficial spillover effects in other spheres – for example, a faster obtaining of the GDPR adequacy decision,” Vladislav Kaim claimed.

In case the executive wants to adopt a more proactive and regional strategy, it could come up with an initiative of a joint Eastern Partnership task force on digital taxation, comprised of representatives of the ministries of economy, fiscal bodies and antitrust regulators. “Aiming for an EaP wide digital service tax in coordination with the processes in the EU will likely be supported by the office of Margrethe Vestager, the vice-president of the European Commission whose mandate lies in this sphere,” specified the author of the study.

The study was produced within the project “Fostering the Adoption and Implementation of Key Reforms”, implemented with the support of National Endowment for Democracy and Watch Dog Moldova.

Photo: DAMIEN MEYER/AFP/Getty Images

Continue Reading
Advertisement

Latest News

Important2 days ago

An International Monetary Fund mission will visit Chişinău next week

An International Monetary Fund (IMF) mission, led by Ruben Atoyan, will be visiting the capital city of the Republic of...

Society2 days ago

What is the Moldovans’ budget share spent on food? Comparative figures

While most of the European countries’ population spend not more than a quarter of their minimum wage on food, Moldovan...

Tourism4 days ago

Six countryside guesthouses from Moldova that are worth visiting

Rural tourism is very popular nowadays. It is practised even in such small countries as Moldova, where one can travel...

Miscellaneous6 days ago

The U.S. Department of State: Vladimir Plahotniuc and his family members are ineligible for visas to the United States

Vladimir Plahotniuc, his wife and two children have been banned from entering the United States because of “significant corruption actions”...

Justice7 days ago

Former head of the Anti-corruption Prosecutor’s Office is under arrest

Viorel Morari, former head of the Anti-corruption Prosecutor’s Office, was detained for a period of 20 days, in addition to...

Politics1 week ago

Moldova in the last decade// the most prominent political fiascoes the country experienced

The decisions taken by the Constitutional Court, the expulsion of Turkish teachers, the adoption of the mixed electoral system, the...

Economy1 week ago

The Chicu government was criticised for its intention to introduce taxes on digital giants. Expert’s opinion

The Government of Moldova led by Ion Chicu was criticised for the proposal of Ministry of Finance, made after the...

Advertisement

Opinions

Advertisement

Trending