Political costs do not allow implementing economic reforms during crisis, experts

In mid-June, the Grecianii Cabinet II presented an anti-crisis program that, according to the officials, will help Moldova overcome the economic crisis faced for over half a year simultaneously with electoral processes. Moldovan economic experts regarded this document with skepticism and criticized it, saying it had an electoral character. They say that the economic administration is marked by the political situation and the pre-electoral period. Owing to the political costs, the Government, at least the present one, will not implement any reforms in the economy that is in crisis. [Moldova’s economy seeks help] Economic expert Victor Parlicov, of the Institute for Development and Social Initiative (IDIS) “Viitorul”, said that regardless of the electoral cycles, the economic situation in Moldova is alarming and the major causes for such a situation reside in the poor governance. Exports during the first four months of this year declined by about 22%, while imports by 31.5% compared with the corresponding period last year. Industrial production over five months fell by 25.3%, while the volume of loans in economy – by about 6%. Victor Parlicov also said that in times of political instability it is practically impossible to attract financial resources from abroad to cover the budget deficit. This will be the main problem confronting the present government as well as the future government, no matter what its composition will be. The president of the Business Consulting Institute (BCI) Mihai Roscovan said that the current government is responsible for the fact that the economy is coming closer to the critical point. In addition to the earlier negative effects of the crises, the employees are made redundant, the migrants come back home, while the banking system started to shake. “The current government is responsible for the present situation as it did nothing to alleviate the negative effects. Moreover, until recently it denied that Moldova was affected by the economic crisis,” Roscovan said. [Anti-crisis program – sack of political ideas] First Deputy Prime Minister Igor Dodon, who resigned from this post for the period of the election campaign as he runs as candidate on behalf of the Communist Party (PCRM), told a news conference that the package of measures formulated by the Government is designed to support the real sector of the economy. The central bank will provide loans to banks for on-lending to economic entities. Other measures aim to reduce controls, liberalize the export of all the products that are in stock, suspend the secondary costs, etc. The programs designed to support the SME sector will be continued. Better conditions will be created at small and medium-sized enterprises for employing persons out of work and those that return home from abroad. An important measure is the payment of the VAT debts by the state and other expenses for companies. A part of the measures will be submitted to the Parliament for approval as, for them to be implemented, the budget should be modified. Victor Parlicov considers that nobody intends to carry out this program that is rather an electoral trick. “The electoral element from this program is as evident as the electoral element from the previous programs. Plainly speaking, all the government programs proposed until now assure that everybody will be provided with everything they need if they vote for them,” the IDIS expert said. The anti-crisis program launched by the Government contains in fact very few anti-crisis actions, the BCI president said. The fiscal basis cannot be strengthened without modifying the Tax Code and this is within the competence of the legislature. The present Government considers that the use of public finances can be optimized only by reducing the sums transferred to the local budgets by 20%. The rest of the program contains sterile phrases and statements like “the government is determined, concerned, preoccupied” etc. “This is an electoral program that meets the current interests of the Communist Party, which are far from the present economic situation and the national interests,” Mihai Roscovan said. [Facts run counter to announced intentions] None of the administrative barriers hindering exports and imports have been removed, said Victor Parlicov. Furthermore, the actions taken by the governors after making this ‘program’ contradict the statements from this ‘program’ because new obstacles appeared, like the introduction of authorizations for fish imports. Until now, authorizations were needed only for the import of meet. As a result, the meat import was monopolized by several ‘oligarchs’ close to the power. The same meat imported from Denmark or Brazil in Romania is 1.5-2.5 times cheaper than in Moldova. According to the economist from IDIS, the facilitation of access to finances for the real sector – the injection of over 500 million lei in the economy by the central bank “to stimulate investments” – is at least an ambiguous, if not aberrant measure. For releasing 500 million lei for lending, the central bank only had to reduce the norm of minimum obligatory reserves from 17% to 14%. At the start of 2007, the norm was about 10%, Victor Parlicov said. [Keeping silent] Another economic, Alex Oprunenco, of the Independent Analytical Center “Expert Grup”, said that Moldova would have easier overcome the effects of the crisis if the authorities had admitted earlier that the country was affected by it and initiated an anti-crisis program before the start of the election campaign. “The European counties admitted that they were in a crisis long before Moldova. The Moldovan authorities could also ascertain what the effects of the crisis were in 2008, calculate, at least in general, those costs and launch an anti-crisis program before the beginning of the election campaign. If so, Moldova would have received assistance not only from the International Monetary Fund, but from other donors as well. According to him, the governors came fully unprepared and did not set clear objectives to overcome the present situation. “The Government has neither capacity nor motivation to deal with the major problems. We will have to attentively watch a new episode from the Moldova serial “Pre-Electoral Economy”,” Victor Parlicov said. Mihai Roscovan said that some of the officials from the new government left the ministries after realizing that their chances were nil. “Aware that they do not have chances to implement something, the leading figures from the new (old) government left the ministries several days after kissing the tricolor and swearing an oath of allegiance. It is one more proof that the present government is irresponsible and duplicitous,” the BCI president said. [The Government counterattacks] It is easy to make statements. It is more difficult to implement reforms and take the country out of the economic crisis, said Igor Dodon. He assured that if the PCRM remains in power, the voters will further receive increased pensions and salaries. “The present Government has all the abilities needed to ensure stability in the banking sector,” the Communist candidate added. Speaking about the factors that would ensure economic growth in Moldova after the July 29 elections, he enumerated the development of the construction sector, protection of the national producers and development of infrastructure. However, the Minister of Finance Mariana Durlesteanu said that the national public budget deficit will amount to 4 billion lei towards the end of this year. This is 9.4% of the GDP. The sources from which the deficit will be covered have not been yet determined. On June 30, the budget deficit was 2.037 billion lei. The deficit is covered from the incomes coming from the privatizations made last yearend.