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The government's stake for the budget: China and Belarus loans, reduced Western funding and credit growth from banks

2018.11.21 Economie Victor Ursu Print version

It is a premiere for the Republic of Moldova when the Government publishes the budget for next year until the election. Every time they vote after the election. In the GNP revenues, they will increase by 5.5 billion lei or 9%, similar to 2018, but it is much less than in 2017. In fact, the years 2017 and 2018 are years of recovery after the crisis of 2015 and 2016 The increase in 2017 was largely due to customs, and in 2018 to the tax office. In 2017, for the first time, we had higher incomes than planned by 2.6 billion lei. Exactly the same will happen in 2018. Now, the Government is looking for new sources of income by improving tax administration, according to IDIS Viitorul economist Veaceslav Ionita, in the "15 minutes of economic realism" show.

For next year, this 5.5 billion lei will not be a problem to accumulate, but it is not fair to compare with 2018 because state-owned Cadastre and Registry companies have turned into public institutions and their income comes directly to the budget, and if we exclude them then the increase will be 4.7 billion lei, which is less than 2017.

"One element that we must mention is the mistakes that the budget will have. It's about 2 billion ROL. We are talking about the social insurance budget where the contribution to 18 + 5% was reduced from 23 + 5%. This will lead to the fact that the social security budget will get less 1.2 billion lei. Another loss is the income tax of individuals whose quota has been capped at 12% for all categories of taxpayers. This is due to the biggest increase in the unimpeded quota. At present, individuals pay 25-30% less than they did before the tax reform. Respectively, BPN loses about 800 million lei. Income tax for individuals is more for local public authorities, which is why about 500 million lei will be local budgets, "Ionita explained.

Most importantly, the Government plans 20% of budget spending to cover them from loans and grants. For next year, the authorities plan 9 billion lei, of which the largest share is the external loans - 4.5 billion lei compared to 5.6 billion lei in 2018. Estimates were reduced because the Government in 2018 will not succeed for the first time to accumulate no half of the forecasted amount. "If it fails to re-establish relations with foreign partners, it will be problematic to raise 4.5 billion lei. The second is the grants, which are planned at almost 2 billion lei. In 2018 the amount of 2.8 billion lei was planned, but we at IDIS Viitorul anticipated in May that in the ideal version 900 million lei will be accumulated. However, in the first 9 months or just 200 million accumulated, the one that makes us believe that by the end of the year the amount received will be up to 500 million lei - the minimum of 15 years. In the absence of external financing in 2018, the Government actively appealed for domestic loans, "says Ionita.

For 2019, we anticipate difficulties in attracting 3 billion lei in the form of external grants and loans. This hole will be covered as in 2018 increased domestic loans and extra collections of taxes and duties. The context is a favorable one. The explanation is that the banking system faces an unprecedented crisis, a surplus of liquidity that was not yet - 27 billion lei (deposits in lei and foreign currency - 61 billion lei, credits 34 billion lei), of which 14 billion are in the form of lions. For this reason, excess liquidity creates problems for the financial system and NBM has sterilized 14 billion lei for which we will pay 500 million lei interest. In this context, for the next year, the Government plans internal loans to 2.5 billion lei, although the amount could be increased to 3.5-4.5 billion lei. And for the first time, for the next year were included two new partners from which Moldova will receive 744 million lei. It is China (644 million lei) and Belarus (100 million lei).

In conclusion, economist Veaceslav Ioniţă believes that covering the needs of budget expenditures is limited to the reduction of foreign loans and grants, new partners - China Belarus and the increase of domestic credits.

The show is made by IDIS "Viitorul" in partnership with Radio Free Europe.

For further details, please contact the press officer, Victor URSU, at the following address: or at 069017396.

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