The National Bank of Moldova announced a 3% reduction in the base rate on short-term monetary policy operations, from 13% to 10%. Contacted by IPN, economic expert Sergiu Gaibu said the state will be the first to benefit from this. As a consequence of the reduction in the base rate, the state securities will tend to decline. Respectively, the interest paid by the state on its debts to banking institutions will diminish, IPN reports.
According to the expert, the base rate is the indicator used to calculate all the other rates applied by the National Bank of Moldova to overnight loans and deposits and to other financial instruments. That’s why the base rate indicates the trend of prices of financial resources and, especially, of the cost of operations promoted by the central bank.
By the base rate, the National Bank of Moldova tries to control inflation and this is usually inversely proportional. That is if the National Bank sees an inflationist process, it increases the base rate. If it does not see such a process, it decreases it. The manipulations with the base rate have the opposite effect – if it grows, it hits the real economy and the financial resources grow more expensive and, as a result, the economic development of the country is impeded. If it declines, the costs of the financial resources decrease and the economy gets an additional stimulus, which is very beneficial.
Sergiu Gaibu said it is absolutely clear that all the factors that determined the inflationist process remained in the past. “This year the harvests are larger than in 2015. The tariffs stabilized with possible small exceptions. There will be no changes in the prices of public utilities. The fuel prices are also not projected to rise significantly. Thus, there are practically no preconditions for major inflationist risks in the real sector of the economy. The only risk that existed was related to the balance of trade of Moldova. But in 2015 this showed that with the decline in imports and exports, the balance-of-trade deficit decreased too,” stated the expert.
The National Bank of Moldova decided to reduce the interest on overnight loans and deposits by 3%, from 16% to 13% a year and, respectively, from 10% to 7% a year. According to the expert, this means that the commercial banks will be able to take out loans from the National Bank cheaper and will be discouraged from depositing the money and will be rather encouraged to use it in the real economy and to release loans.
