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NBM: Law bans provision of any financial assistance to state


https://www.ipn.md/en/nbm-law-bans-provision-of-any-financial-assistance-to-state-7966_1080759.html

The Law on the National Bank of Moldova bans the provision of any financial assistance to the state and its bodies. The central bank noted that any loan from the NBM will lead to the impoverishing of the population. Lending to the state or businesses is ensured by bank and nonbank financial institutions and the banking sector at present has enough liquidity. The details were provided following reports about an eventual loan intended for the state or the use of the foreign exchange reserves, IPN reports.

“To overcome the economic crisis, to support business entities and the population in times of a pandemic, the executives of many countries resort to domestic and foreign loans. In the Republic of Moldova, the attraction of internal resources by the executive is stipulated by the law and the National Bank, as the fiscal agent of the state, regularly places state securities and bonds on the primary market,” the NBM said in a press release.

It noted that any loan from the central bank for the state would mean an additional issue of coins that would lead to an inevitable rise in prices and, consequently, to the impoverishing of the population, with the most vulnerable sections of society being affected.

“It should be noted that the money from the accounts of the Ministry of Finance obtained as foreign financial assistance (loans and grants) were included in the official reserve assets. The Ministry of Finance freely uses this money, including after conversion into national currency, for covering budget costs and implementing investment projects. It should also be noted that the official reserve assets are managed by the central bank to support the balance of payments and, if necessary, to regulate their balance so as to maintain confidence in the national currency and in the national economy, in general,” said the NBM.

It also said that it keeps the foreign exchange reserves at the level it considers appropriate. The conversion of these reserves and their use at internal level would immediately lead to a rise in prices as for one unit of currency there would be issued once again national currency units at the corresponding exchange rate. A depreciation caused by the diminution of credibility of the national currency would be witnessed, followed by a subsequent rise in prices – inflation.