Sep 19, 2021
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RTA: what will Moldova pay for the new IMF loan?

“Fulfillment of the IMF conditions may cause a surge of popular indignation this year”

The Moldovan economy is gradually stopping the decline caused by last year’s quarantines and is beginning to recover, GDP is growing, and budget revenues are also growing. However, macroeconomic indicators leave much to be desired: fuel prices rise almost every day, food prices are rising, some of them are growing significantly. And in the short term, there will be a new wave of the pandemic and a new gas contract, which will entail an increase in tariffs for the population, and a new round of growth in prices for everything, according to the Moldovan online publication. Regional Trends Analytics (RTA)

All this, according to the publication, will create a difficult socio-economic situation, and the authorities will have to take measures to support both the population and business. This can be done only through external financial assistance.

“As you know, the previous government, where the socialists ruled the ball, was not favored by Western funding, and opponents blocked access to the Russian one through decisions of the Constitutional Court. PAS attracts much more sympathy from European lenders, so there shouldn’t be any special problems. Something has already been received, by the way. For example, 236 million euros without preconditions from the IMF within the so-called. “Vaccinations against a pandemic”, which Chisinau is free to spend at its own discretion – they will close the new budgetary hole formed after the increase in pensions ”,

– writes RTA

Chisinau also received the first tranche of macro-financial assistance – 36 million euros, which will be spent on combating the pandemic, economic recovery and police reform.

The main thing for the new government is the approval of a new program of cooperation with the International Monetary Fund, the author of the article notes a political scientist. Vladimir Rotar

He recalls that last year the socialist government failed to achieve approval of the cooperation program with the IMF.

Today in the local IMF office they say that new negotiations will be conducted from new positions, given the change of government, which means that the conditions will be new.

It has long been clear that the IMF is far from charity, and the conditions it puts forward often put the authorities of states in a difficult situation, because these conditions imply measures that are unpopular with the population. And sometimes these conditions put an end to the political career of the representatives of the authorities themselves.

Rotar cites the example of neighboring Ukraine, which could not fulfill the previous IMF program, and even with the new one it is not very successful. Although, just in order for this new program to be approved by the Fund, Kiev had to pass a law on the sale of land, which caused outrage among the country’s population, and also actually transfer its banking system into the hands of Western partners.

“We can only guess what the IMF will demand from Moldova, although some estimates can be made. Most likely, the Fund will definitely not abandon the previous requirements: improving the fiscal sphere, reforming the justice system, and fighting corruption. But these were the conditions only for the approval of the program – for its further implementation, others would appear. One of them can be said almost for sure – it consists in repealing the law on lowering the retirement age “,

– notes the edition.

And he recalls that the IMF criticized the adoption of this law by the socialists, the opposition also opposed it, which today has become the government. It can be assumed that now PAS will easily agree to abolish this law and raise the retirement age.

It can also be assumed that under the conditions of the IMF there will be clauses on control by the “Western partners” of all appointments to key positions in the Moldovan justice and on strengthening the independence of the Central Bank from the state. And the most unpopular thing is tax reform and tariff increases.

“The latter was also in the Ukrainian program and caused the winter of 2020–2021. mass protests of the population dissatisfied with high payments. As a result, Kiev, to the displeasure of the IMF, had to make concessions, temporarily freezing tariffs and making a discount on gas. For Moldova, which will soon be faced with an increase in the price of Russian gas, this should be remembered when negotiating with the IMF. Otherwise, a sharp increase in tariffs, imposed on the already tense socio-economic situation in the country, may cause a strong surge of popular indignation this year, ”

– warns Analytics of regional trends

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