{"id":448169,"date":"2020-04-19T13:36:27","date_gmt":"2020-04-19T13:36:27","guid":{"rendered":"http:\/\/www.moldova.org\/en\/?p=448169"},"modified":"2020-04-22T18:23:11","modified_gmt":"2020-04-22T18:23:11","slug":"experts-what-is-wrong-with-the-credit-agreement-signed-with-the-russian-federation","status":"publish","type":"post","link":"https:\/\/www.moldova.org\/en\/experts-what-is-wrong-with-the-credit-agreement-signed-with-the-russian-federation\/","title":{"rendered":"Experts: What is wrong with the credit agreement signed with the Russian Federation?"},"content":{"rendered":"<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>The Russian Federation and the Republic of Moldova signed a credit agreement, which provides for a loan of 200 million euros. The announcement was made by the head of state 2 days ago.<\/p>\n<p><em>&#8220;It is the first actual financial support offered from outside of our country during this crisis period, and the money will be transferred to the state budget of Moldova for the country&#8217;s needs, including for financing infrastructure projects,&#8221;<\/em> <a href=\"https:\/\/www.facebook.com\/dodon.igor1\/?__tn__=%2Cd%2CP-R&amp;eid=ARBtbhFiO85lp8Zif7Zr-3wUu-TGiYd4S3T2VC6fHZkkfxTnzXNhWq1QXhUx6yDerqsQLpKgLDrI6X-t\">announced<\/a> Igor Dodon on social media.<\/p>\n<p>At the same time, several experts&#8217; opinions were published in the media, stating that the credit agreement could be problematic.<\/p>\n<p>Economist <strong>Veaceslav Negru\u021b\u0103<\/strong> explained\u00a0in a blog <a href=\"https:\/\/vnegruta.wordpress.com\/2020\/04\/18\/ce-nu-i-asa-cu-creditul-pentru-dodon-si-rectificarea-bugetului-de-stat\/\">article<\/a> what are the hidden aspects of the 200 million euros credit that will be received by Moldova from the Russian Federation.<\/p>\n\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/negruta2.jpg&#8221; align=&#8221;left&#8221; force_circle=&#8221;off&#8221;]\n<p><em>&#8220;The annual interest rate is 2% for a euro loan. In fact, this loan seems to be the most expensive credit resource that Moldova is receiving during this period. The IMF credit funds of $ 235 million are cheaper for a period of 30 years. And resources in euros from Brussels could be cheaper, if the necessary requests were made. In the case of a 10-day delay in repayment of the loan, the respective amount would be considered outstanding and a 3% interest rate would be applied for the delay period (150% at the initial rate of 2%).,&#8221;<\/em> wrote the economist.<\/p>\n<p>The expert believes that Dodon will use the credit funds for the next election period.<\/p>\n<p><span style=\"color: #000080\">See also: <a style=\"color: #000080\" href=\"https:\/\/www.moldova.org\/en\/the-state-of-emergency-side-effects-or-what-is-the-proper-moment-to-start-the-presidential-election-campaign\/\">&#8220;The state of emergency \u2018side effects\u2019 or what is the proper moment to start the presidential election campaign&#8221;<\/a><\/span><\/p>\n<blockquote><p>&#8220;This loan from the Russian Federation was included in the 2020 budget, when it was adopted in 2019, as a source of financing of a part of the budget deficit of 7.4 billion lei. When rectifying the 2020 budget, the government announced an increase in the budget deficit from 7.4 to 16.2 billion lei. The prime minister said that half of this deficit will be covered by credit resources from the IMF and Russia. But the Russian loan (part of it) was already included in the financing of the initial deficit. [&#8230;] It turns out to be double-entry bookkeeping.&#8221;<\/p><\/blockquote>\n<p>Economic expert\u00a0<strong>Dumitru Budianschi,\u00a0<\/strong>from the Independent Analytical Center Expert-Grup, considers the credit agreement as being totally at the disadvantage of the Republic of Moldova, even harmful to it.<\/p>\n<p>The credit agreement specifies the following: <span style=\"color: #000080\"><em>&#8220;The Moldovan side, in the interest of extending the economic-trade relations between the two countries, will endeavour to ensure the implementation of joint projects on the territory of the Republic of Moldova by Russian companies. To this end, Russian companies will have access to participate in competitive procedures for the procurement of goods and services, established in the Republic of Moldova, under favourable conditions like those offered to companies in Moldova and other companies.\u201d\u00a0<\/em><\/span><\/p>\n\n\n\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/budianschi4.jpg&#8221; align=&#8221;right&#8221; force_circle=&#8221;off&#8221;]\n<p>Still, the expert <a href=\"https:\/\/www.zdg.md\/stiri\/stiri-economice\/un-expert-economic-spune-de-ce-imprumutul-cu-federatia-rusa-nu-trebuie-aprobat-in-forma-semnata-este-total-in-dezavantajul-r-moldova-chiar-daunator\/\">believes<\/a> that the basic concept to be emphasized in this agreement is <em>&#8220;joint projects&#8221;<\/em>. <em>&#8220;Before transferring the money, the Russian Federation and Moldova will approve a list of joint projects. The consequences of this provision are the most dangerous and with enormous risks for Moldova. It is, most likely, about projects that the Republic of Moldova does not need, but which the Russian Federation or companies affiliated with some group interests may need to be implemented,&#8221;<\/em>\u00a0said\u00a0Dumitru Budianschi.<\/p>\n<p>The credit of 200 million euros offered by Russia is a <em>&#8220;hybrid&#8221;<\/em>, which combines the sovereign credit, previously promised by the authorities, and the commercial credit,\u00a0as the economic expert <strong>Veaceslav Ionita<\/strong>\u00a0<a href=\"https:\/\/www.zdg.md\/stiri\/stiri-economice\/noi-opinii-despre-creditul-de-200-de-milioane-de-euro-oferit-de-rusia-un-expert-economic-explica-diferenta-dintre-banii-care-i-ofera-uniunea-europeana-si-creditul-hibrid-din-federat\/\">stated<\/a> for ZdG.<\/p>\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/ionita2.jpg&#8221; align=&#8221;left&#8221; force_circle=&#8221;off&#8221;]\n<p id=\"ui-id-4\"><em>&#8220;On the one hand, it is a loan that goes to the state budget. On the other hand, the Russian Federation has set some conditions which, if we talk about a civilised country and competition, we would say that they are ok. One of the conditions is that Russian companies have the right to participate in public procurement. In a classic commercial contract it is clearly stipulated that the company that will implement the project is our company. If we didn&#8217;t know that things are not exactly democratic in the Russian Federation, I would say that this is a good condition,&#8221; <\/em>claimed the economic expert.<\/p>\n<blockquote><p>&#8220;In these hybrid loans, there is a risk that one will pay more for the purchased goods and services. The second risk is that there may be conditions that we do not know, such as access to privatisation. I would have nothing against it if a public privatisation process is announced, a Russian company participates and wins. I don&#8217;t have a problem if it&#8217;s transparent. But, given that this may be a provision in this contract, it could be a problem.&#8221;<\/p><\/blockquote>\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/gaibu2.jpg&#8221; align=&#8221;right&#8221; force_circle=&#8221;off&#8221;]\n\n<p><em>&#8220;The worst part is the existence of Article 7, part 2, which is an obvious Trojan horse. Basically, any outstanding debt of any entity in Moldova to the Russian Government or institutions of the Russian government, where there is an &#8220;agreement of the Moldovan side&#8221;, automatically becomes part of this credit agreement. Generally speaking, linking other debts with this agreement is a pretty nasty thing and requires a detailed analysis and a comprehensive report by the Ministry of Finance on the debts and guarantees that would fall under this agreement,&#8221;<\/em> <a href=\"https:\/\/www.zdg.md\/stiri\/stiri-economice\/noi-opinii-despre-creditul-de-200-de-milioane-de-euro-oferit-de-rusia-un-expert-economic-explica-diferenta-dintre-banii-care-i-ofera-uniunea-europeana-si-creditul-hibrid-din-federat\/\">stated<\/a> economic expert <strong>Sergiu Gaibu<\/strong>.<\/p>\n<blockquote><p>&#8220;It is better that such an agreement is neither signed, nor ratified. If the gas debt is attached to this agreement, based on Article 7, the debt of $7 billion will turn into $11.5 billion in 10 years. What is the interest of the government, if it accepts such clauses in a signed contracts?&#8221;<\/p><\/blockquote>\n<p>Previously, it was announced that the International Monetary Fund (IMF) approved a <a href=\"https:\/\/www.moldova.org\/en\/the-imf-approved-235-million-as-emergency-assistance-to-moldova-to-address-the-covid-19-pandemic\/\">disbursement<\/a> of about $235 million to meet Moldova\u2019s urgent financial needs amid the COVID-19 pandemic. Also, the European Union (EU) will re-direct<strong>\u00a087 million euros<\/strong>\u00a0of\u00a0<a href=\"https:\/\/www.moldova.org\/en\/the-eu-announced-its-support-to-overcome-the-pandemic-crisis-in-moldova\/\">funds<\/a> available from other existing assistance programmes to overcome the consequences of the crisis provoked by COVID-19 in the Republic of Moldova.<\/p>\n<p>Photo: chamber.md<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span>The Russian Federation and the Republic of Moldova signed a credit agreement, which provides for a loan of 200 million euros. The announcement was made by the head of state 2 days ago. &#8220;It is the first actual financial support offered from outside of our country during this crisis period, and the money will be [&hellip;]<\/p>\n","protected":false},"author":31,"featured_media":448174,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,3,4],"tags":[515,678,381,90,35,679,27,155,608,32],"class_list":["post-448169","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion","category-politics","category-society","tag-agreement","tag-credit","tag-crisis","tag-experts","tag-important","tag-loan","tag-moldova","tag-opinion","tag-pandemic","tag-russia"],"content_social_share":"<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>The Russian Federation and the Republic of Moldova signed a credit agreement, which provides for a loan of 200 million euros. The announcement was made by the head of state 2 days ago.<\/p>\n<p><em>&#8220;It is the first actual financial support offered from outside of our country during this crisis period, and the money will be transferred to the state budget of Moldova for the country&#8217;s needs, including for financing infrastructure projects,&#8221;<\/em> <a href=\"https:\/\/www.facebook.com\/dodon.igor1\/?__tn__=%2Cd%2CP-R&amp;eid=ARBtbhFiO85lp8Zif7Zr-3wUu-TGiYd4S3T2VC6fHZkkfxTnzXNhWq1QXhUx6yDerqsQLpKgLDrI6X-t\">announced<\/a> Igor Dodon on social media.<\/p>\n<p>At the same time, several experts&#8217; opinions were published in the media, stating that the credit agreement could be problematic.<\/p>\n<p>Economist <strong>Veaceslav Negru\u021b\u0103<\/strong> explained\u00a0in a blog <a href=\"https:\/\/vnegruta.wordpress.com\/2020\/04\/18\/ce-nu-i-asa-cu-creditul-pentru-dodon-si-rectificarea-bugetului-de-stat\/\">article<\/a> what are the hidden aspects of the 200 million euros credit that will be received by Moldova from the Russian Federation.<\/p>\n\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/negruta2.jpg&#8221; align=&#8221;left&#8221; force_circle=&#8221;off&#8221;]\n<p><em>&#8220;The annual interest rate is 2% for a euro loan. In fact, this loan seems to be the most expensive credit resource that Moldova is receiving during this period. The IMF credit funds of $ 235 million are cheaper for a period of 30 years. And resources in euros from Brussels could be cheaper, if the necessary requests were made. In the case of a 10-day delay in repayment of the loan, the respective amount would be considered outstanding and a 3% interest rate would be applied for the delay period (150% at the initial rate of 2%).,&#8221;<\/em> wrote the economist.<\/p>\n<p>The expert believes that Dodon will use the credit funds for the next election period.<\/p>\n<p><span style=\"color: #000080\">See also: <a style=\"color: #000080\" href=\"https:\/\/www.moldova.org\/en\/the-state-of-emergency-side-effects-or-what-is-the-proper-moment-to-start-the-presidential-election-campaign\/\">&#8220;The state of emergency \u2018side effects\u2019 or what is the proper moment to start the presidential election campaign&#8221;<\/a><\/span><\/p>\n<blockquote><p>&#8220;This loan from the Russian Federation was included in the 2020 budget, when it was adopted in 2019, as a source of financing of a part of the budget deficit of 7.4 billion lei. When rectifying the 2020 budget, the government announced an increase in the budget deficit from 7.4 to 16.2 billion lei. The prime minister said that half of this deficit will be covered by credit resources from the IMF and Russia. But the Russian loan (part of it) was already included in the financing of the initial deficit. [&#8230;] It turns out to be double-entry bookkeeping.&#8221;<\/p><\/blockquote>\n<p>Economic expert\u00a0<strong>Dumitru Budianschi,\u00a0<\/strong>from the Independent Analytical Center Expert-Grup, considers the credit agreement as being totally at the disadvantage of the Republic of Moldova, even harmful to it.<\/p>\n<p>The credit agreement specifies the following: <span style=\"color: #000080\"><em>&#8220;The Moldovan side, in the interest of extending the economic-trade relations between the two countries, will endeavour to ensure the implementation of joint projects on the territory of the Republic of Moldova by Russian companies. To this end, Russian companies will have access to participate in competitive procedures for the procurement of goods and services, established in the Republic of Moldova, under favourable conditions like those offered to companies in Moldova and other companies.\u201d\u00a0<\/em><\/span><\/p>\n\n\n\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/budianschi4.jpg&#8221; align=&#8221;right&#8221; force_circle=&#8221;off&#8221;]\n<p>Still, the expert <a href=\"https:\/\/www.zdg.md\/stiri\/stiri-economice\/un-expert-economic-spune-de-ce-imprumutul-cu-federatia-rusa-nu-trebuie-aprobat-in-forma-semnata-este-total-in-dezavantajul-r-moldova-chiar-daunator\/\">believes<\/a> that the basic concept to be emphasized in this agreement is <em>&#8220;joint projects&#8221;<\/em>. <em>&#8220;Before transferring the money, the Russian Federation and Moldova will approve a list of joint projects. The consequences of this provision are the most dangerous and with enormous risks for Moldova. It is, most likely, about projects that the Republic of Moldova does not need, but which the Russian Federation or companies affiliated with some group interests may need to be implemented,&#8221;<\/em>\u00a0said\u00a0Dumitru Budianschi.<\/p>\n<p>The credit of 200 million euros offered by Russia is a <em>&#8220;hybrid&#8221;<\/em>, which combines the sovereign credit, previously promised by the authorities, and the commercial credit,\u00a0as the economic expert <strong>Veaceslav Ionita<\/strong>\u00a0<a href=\"https:\/\/www.zdg.md\/stiri\/stiri-economice\/noi-opinii-despre-creditul-de-200-de-milioane-de-euro-oferit-de-rusia-un-expert-economic-explica-diferenta-dintre-banii-care-i-ofera-uniunea-europeana-si-creditul-hibrid-din-federat\/\">stated<\/a> for ZdG.<\/p>\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/ionita2.jpg&#8221; align=&#8221;left&#8221; force_circle=&#8221;off&#8221;]\n<p id=\"ui-id-4\"><em>&#8220;On the one hand, it is a loan that goes to the state budget. On the other hand, the Russian Federation has set some conditions which, if we talk about a civilised country and competition, we would say that they are ok. One of the conditions is that Russian companies have the right to participate in public procurement. In a classic commercial contract it is clearly stipulated that the company that will implement the project is our company. If we didn&#8217;t know that things are not exactly democratic in the Russian Federation, I would say that this is a good condition,&#8221; <\/em>claimed the economic expert.<\/p>\n<blockquote><p>&#8220;In these hybrid loans, there is a risk that one will pay more for the purchased goods and services. The second risk is that there may be conditions that we do not know, such as access to privatisation. I would have nothing against it if a public privatisation process is announced, a Russian company participates and wins. I don&#8217;t have a problem if it&#8217;s transparent. But, given that this may be a provision in this contract, it could be a problem.&#8221;<\/p><\/blockquote>\n[aesop_character img=&#8221;http:\/\/www.moldova.org\/en\/wp-content\/uploads\/sites\/2\/2020\/04\/gaibu2.jpg&#8221; align=&#8221;right&#8221; force_circle=&#8221;off&#8221;]\n\n<p><em>&#8220;The worst part is the existence of Article 7, part 2, which is an obvious Trojan horse. Basically, any outstanding debt of any entity in Moldova to the Russian Government or institutions of the Russian government, where there is an &#8220;agreement of the Moldovan side&#8221;, automatically becomes part of this credit agreement. Generally speaking, linking other debts with this agreement is a pretty nasty thing and requires a detailed analysis and a comprehensive report by the Ministry of Finance on the debts and guarantees that would fall under this agreement,&#8221;<\/em> <a href=\"https:\/\/www.zdg.md\/stiri\/stiri-economice\/noi-opinii-despre-creditul-de-200-de-milioane-de-euro-oferit-de-rusia-un-expert-economic-explica-diferenta-dintre-banii-care-i-ofera-uniunea-europeana-si-creditul-hibrid-din-federat\/\">stated<\/a> economic expert <strong>Sergiu Gaibu<\/strong>.<\/p>\n<blockquote><p>&#8220;It is better that such an agreement is neither signed, nor ratified. If the gas debt is attached to this agreement, based on Article 7, the debt of $7 billion will turn into $11.5 billion in 10 years. What is the interest of the government, if it accepts such clauses in a signed contracts?&#8221;<\/p><\/blockquote>\n<p>Previously, it was announced that the International Monetary Fund (IMF) approved a <a href=\"https:\/\/www.moldova.org\/en\/the-imf-approved-235-million-as-emergency-assistance-to-moldova-to-address-the-covid-19-pandemic\/\">disbursement<\/a> of about $235 million to meet Moldova\u2019s urgent financial needs amid the COVID-19 pandemic. Also, the European Union (EU) will re-direct<strong>\u00a087 million euros<\/strong>\u00a0of\u00a0<a href=\"https:\/\/www.moldova.org\/en\/the-eu-announced-its-support-to-overcome-the-pandemic-crisis-in-moldova\/\">funds<\/a> available from other existing assistance programmes to overcome the consequences of the crisis provoked by COVID-19 in the Republic of Moldova.<\/p>\n<p>Photo: chamber.md<\/p>\n<div class='heateorSssClear'><\/div><div  class='heateor_sss_sharing_container heateor_sss_horizontal_sharing' data-heateor-sss-href='https:\/\/www.moldova.org\/en\/experts-what-is-wrong-with-the-credit-agreement-signed-with-the-russian-federation\/' data-heateor-sss-no-counts=\"1\"><div class='heateor_sss_sharing_title' style=\"font-weight:bold\" ><\/div><div class=\"heateor_sss_sharing_ul\"><a aria-label=\"Facebook\" class=\"heateor_sss_facebook\" 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