The raising by the Government of a loan from the National Bank of Moldova (NBM) of up to 20 billion lei is illegal. Article 41 of the Law on the NBM stipulates a ban on lending to the state. In a position note, experts of the on Independent Think Tank "Expert-Grup", say the politicians should make use of legal and reliable sources for financing population and business support programs that are so necessary and expected, primarily due to the new restrictions and the state of emergency, IPN reports.
According to "Expert-Grup", an eventual loan from the NBM, especially of such a size (about 10% of the GDP), will create inflationist pressure, will cause the depreciation of the national currency, will undermine economic growth, will lead to a reduction in the number of jobs and worsening of the living conditions of the population. Such a loan will oblige the central bank to print lei. This will lead to a rise in the volume of lei without coverage in the economy, causing pressure on the national currency. To stabilize the situation, the NBM will have to sterilize this excess of liquidity by making the monetary policy and sale of foreign currency from the foreign exchange reserves harsher. This will worsen the current economic crisis and will generate the loss of tens of thousands of jobs and the bankruptcy of thousands of enterprises.
The loan will further affect Moldova’s image before the potential creditors and investors in the country and abroad and this will make the attraction of financing in advantageous conditions and of foreign and local investment more difficult.
The initiative will generate state budget losses. Amid the expansion of country risks and of a more restrictive policy, the steps taken to reduce the amount of money without coverage in the economy will trigger a rise in the costs of loans taken out by the Government and in the interest rates on state securities that are permanently used by the Ministry of Finance to refinance the loans raised previously and to finance the budget deficit. Respectively, the servicing of the state debt will be more expensive and the central bank’s capacity to maintain the country’s macro-economic stability will be affected and the bank’s independence will be undermined.
In a note published recently, the NBM says it does not support the idea of directly lending to the state as this is illegal and would generate associated macroeconomic risks. Consequently, if the central bank is forced to lend to the Government, including on the pretext of the state of emergency, this would be direct interference in the monetary authority’s activity and the principle of independence of the central bank will be violated under political influence.
The proposal for the state to take out a loan from the National Bank of Moldova was formulated by ex-President Igor Dodon in a TV program. According to the Socialist leader, with this money the state can help the citizens and business entities during the state of emergency.
