ECO-BUS WEEKLY DIGEST April 14-20 December. Most important Economy & Business news by IPN
● WEDNESDAY, December 16
NBM to monitor level of indebtedness of banks
The Executive Board of the National Bank of Moldova (NBM) approved the Regulation on the leverage effect for banks and the amendment of the Instruction on the submission by banks of COREP reports for supervisory purposes. According to the NBM, the leverage indicator aims to limit the risk of over-indebtedness of the banking sector during periods of economic growth and the risk of a significant decrease in banking assets in the downward phases of the business cycle. This indicator has been introduced in addition to the own funds rate, which is essential to ensure sufficient own funds cover unexpected losses. The 2007 crisis showed that capital requirements alone are not enough to prevent banks from taking excessive risks that can lead to higher levels of indebtedness. Thus, the application of the leverage indicator will help them to manage their risks more prudently and to minimize unforeseen capital losses.
Parliament abrogates so-called “billion law”
The legislative body abrogated the Law of 2016 concerning the issuing of payment bonds deriving from the state guarantees of November 17, 2014 and April 1, 2015 after giving two readings to a relevant bill on December 16. Socialist MP Petru Burduja, who is one of the bill authors, said in Parliament that the bill is aimed at eliminating the additional fiscal pressure on the population and the economy of the Republic of Moldova and at efficiently using the financial resources accumulated by the state as taxes in the interest of the citizens and at preventing a substantial increase in the state debt. “It is at least incorrect to make the repayment of the money stolen from the banking system the people’s burden and this is an additional fiscal burden for the state. The citizens should not answer for the mistakes made by the former governments,” stated the MP.
Municipal budget of Chisinau with deficit of about 1.3bn lei
The draft municipal budget of Chisinau 2021 provides for revenues of 4.66 billion lei, including 2.64 billion lei in transfers from the state budget, and for an expenditure of 5.95 billion lei. The budget deficit is projected at about 1.3 billion lei, IPN reports. According to mayor general Ion Ceban, the deficit derives from three large projects that the municipality aims to implement, namely: the purchase of buses, two commitments related to solid waste management with the EBRD/EIB and the development of an area in Chisinau and of an industrial street.
● THURSDAY, December 17
Draft state budget and budgetary-fiscal policy for 2021 adopted amid scandal
The draft state budget and budgetary-fiscal policy for 2021 were passed after being given a second reading, with 56 votes in favor, late yesterday evening. The state social insurance budget and the draft law on the mandatory health insurance funds were also given a second reading. The documents were put to the vote without being debated. The opposition MPs expressed their indignation at not being invited to the sitting that started after 10pm as the bills were to be discussed on December 17. The Socialist MPs argued they acted like this so as to avoid interminable discussions on important laws. The state budget revenues were adopted at 41.415 billion lei, up 4.2 billion lei or 11.3% on the state budget for 2020. The rise is based on the higher amounts planned to be collected as taxes and on grant inflows. The state budget provides for an expenditure of 55.399 billion lei, an increase of 2.2 billion lei or 4.1% on the expenditure for 2020. The state budget expenditure is determined by the objectives of the medium-term budgetary framework.
Charter flights to Moscow to be provided as of Dec. 25
The Russian airline Aeroflot will operate charter flights from the Chisinau International Airport to the Sheremetyevo International Airport in Moscow as of December 25, on Fridays and Sundays. The Embassy of Russia in the Republic of Moldova said the Russian citizens who arrive home must fill out a questionnaire abroad or electronically. Also, within three calendar days of the arrival, they are to do the test for COVID-19 and to inform about the test results. Until the results become available, the person is obliged to quarantine at home. The foreigners, with small exemptions, are banned entry to Russia. Those who can enter Russia must present the negative result of the COVID-19 test done during three days before the entry. The results must be presented in Russian or English.
● FRIDAY, December 18
Potential of bilateral relationship with Switzerland should be developed in more fields, statement
Switzerland is an important economic partner of the Republic of Moldova. The potential of the economic and commercial relations between the two states should be developed in such areas as agriculture, renewable energy, IT, industry and tourism, secretary of state at the Ministry of Economy and Infrastructure Iuliana Drăgălin stated in the meeting of the Moldovan-Swiss intergovernmental commission for commercial and economic cooperation. The official encouraged the Swiss side and the interested companies to fully profit from the opportunities existing in the ICT sector by becoming residents of Moldova IT Park and of other industrial platforms. Iuliana Drăgălin thanked the Swiss side for the medical equipment for containing the COVID-19 pandemic, to the total value of over €1.3 million, supplied to the Republic of Moldova. “The year 2020 was a difficult one and with many challenges for each of us. It left an imprint on the economic and social life worldwide. Only by combining forces and diversifying the cooperation areas, we can overcome the economic crisis,” stated the official.
Owing to pandemic crisis, banks enabled to defer payments, governor
Given the difficult crisis conditions caused by the pandemic, the banks showed receptivity and allowed both private individuals and legal entities to defer payments, the governor of the National Bank of Moldova (NBM) Octavian Armașu stated in an interview for the press, being quoted by IPN. This way, the legal entities submitted over 1,000 requests to reschedule the payments, with a balance of 5.254 million lei or 20% of the loan portfolio of legal entities in the financial sector. Of these requests, about 900 or 88% were approved, with a balance of 4.813 million lei or 18% of the loan portfolio of legal entities. The governor noted that 21,625 private individuals (a balance of 2.275.5 million lei or 15.5% of the loan portfolio of private individuals) asked for the rescheduling of payments, these being approved in proportion of 98%, with a balance of 2.195 million lei.
Octavian Armașu: Annulment of “billion law” is a very worrisome signal
The annulment of a law whose primary objective was to protect the public interest in maintaining financial stability is a very worrisome signal for the development partners, local and foreign investors, endangering Moldova’s credibility as regards its capacity to honor the financial obligations, said the governor of the National Bank of Moldova Octavian Armași, commenting on the annulment of the “billion law” that is officially called the law on the issuing of state bonds for the Ministry of Finance to fulfill the payment obligations deriving from the state guarantees. “The execution of the state guarantee and avoidance of the central bank’s de-capitalization by issuing state securities are aimed at maintaining the financial stability of the Republic of Moldova, being an element for safeguarding the financial-banking system requested by the International Monetary Fund,” the governor stated within an interview for the press.
NBM governor: New program with IMF will not be signed until this yearend
The governor of the National Bank of Moldova Octavian Armașu is sure that a new program with the International Monetary Fund will not be signed be by the end of this year. According to him, owing to unfavorable initiatives like the repealing of the law on the issuing of state bonds for the Ministry of Finance to fulfill the payment obligations deriving from the state guarantees or the “billion law”, the IMF will have to take a step back. Also, the eventual negotiations with the IMF will be much more difficult. In an interview for the press, the governor said that among the actions that were to be taken by the national authorities after the Moldovan authorities and the IMF representatives in July 2020 agreed an economic reform program at the level of experts were the amendment of the legislation for strengthening the National Bank’s independence and the appointment of new vice governors of the NBM by Parliament.
Laws adopted by Parliament pose serious threats to macroeconomic and financial stability , FMI
Implementation of the recent legal initiatives approved by the Moldovan Parliament would pose serious threats to Moldova’s macroeconomic and financial stability, which is already under severe pressures from the COVID-19 pandemic, Rodgers Chawani, IMF Resident Representative in the Republic of Moldova, noted in a statement that is quoted by IPN. The official said the IMF’s financial support under the new ECF/EFF program is subject to Moldova’s unequivocal commitment to the irreversibility of the past progress and broad political support for the ambitious governance and institutional reform agenda that was agreed with staff earlier this year.
Next-generation fertilizers to be produced in Leova
A hall for treating nitrogen fertilizers with inhibitors was opened in Tigheci village of Leova district. This is the first such treatment point in Moldova. It is 6,000 square meters in area and can store 6,000 tonnes of raw material and about 3,000 tonnes of finished products. In the inaugural event, Minister of Agriculture, Regional Development and Environment Ion Perju said the problems related to the supply of fertilizers met in spring owing to the restrictions imposed because of the pandemic confirmed the necessity of launching and consolidating local production. The ecological aspect is also important. The pollution of soil with nitrates is a major problem for the region, while the EU imposed restrictions to avoid the pollution of water and soil. The fertilizers that will be made at the treatment point in Moldova will fully meet the requirements.
