The soaring prices of goods and services amid the declining purchasing power is the most serious concern of the Moldovans at present. The experts invited to a public debate staged by IPN News Agency discussed the causes for such a state of affairs, the taken actions and future solutions.
Igor Boțan, the standing expert of IPN’s project, said the price is an economic category that represents the monetary value of a product or service. It is set according to two main systems – the market price based on the interaction between supply and demand and the price imposed in a centralized way by the state. The last is based on the setting of prices between government agencies starting from particular necessities.
“In a market economy, the final price is set depending on the production cost, prices of competitors and the supply-demand ratio. There are several major objectives that a producer of goods and services takes into account when setting prices. First of all, those who manage enterprises want their functionality to be guaranteed. They also want to make a profit. Some of the entrepreneurs want to conquer the market and resort to the reduction of prices. In other cases, the prices are increased artificially so as to occupy a leading market position,” explained the expert.
“Unlike the prices, inflation is a constant rise in the general level of prices of goods and services. At the same time, the prices of some of the products can grow, while of others can decline. The general average is called inflation. The state has instruments to influence prices to a particular extent. Inflation is usually measured in a similar way everywhere in the world based on the so-called consumer basket,” said Igor Boțan. According to him, the National Bank of Moldova is the main institution responsible for the setting of prices. In accordance with the law, the main objective of the NBM is to maintain the prices stable using such key instruments as the interest rate on loans and the exchange rate.
MP of Party of Action and Solidarity Dumitru Alaiba said the inflation in Moldova now reached a record level in the region – 27%. This figure places Moldova second by the rate of inflation, after Turkey. The National Bank bears a part of the blame as it hesitated in parts or adopted somehow late or insufficient decisions. “These acts were fueled by political narrative that, for its part, generated panic in society. Inflation is everywhere and the way in which they talk about it is different. The people look at the situation and see how the prices grow in an uncontrolled way and don’t know what to expect tomorrow and when such developments will end. It is our duty to calm the citizens down, to explain to them what is going on and what different state institutions do to stop this wave,” said the MP, who heads the parliamentary commission on economy, budget and finance.
According to him, the actions were late in parts. “In the Republic of Moldova, inflation started to grow last June-July, unlike in other countries of the region where this phenomenon started earlier. When you see what is happening in the region, you need to get ready to act, but the NBM took action only in September. Consumer loans are another internal cause. These went out of control, primarily in the case of micro-financing. In this regard, a bill was adopted in Parliament to make not only the population, but also the companies that provide such loans more responsible,” stated Dumitru Alaiba.
According to the MP, inflation was also impacted by the foreign factor that is much more serious. “The Republic of Moldova is several tens of kilometers away from a war. This fueled anxiety in society. Also, foreign trade - both imports and exports - goes through very painful changes as the Republic of Moldova depended a lot on the Odessa Port that is now closed. The terrestrial route that goes to Russia, Belarus was compromised, while the only route through Romania is simply blocked due to the very intense traffic. This situation generated price rises,” he stated.
“But nothing was more painful than the energy prices as what fueled inflation before the war was this regional crisis of energy resources. When the price of gas rises, the prices of products grow successively. Besides, there is also one more problem that I do not want to justify – the monopolists or the so-called speculators. When some of the prices grow, we can understand. But the shrewd once treble their earnings by profiting from the situation. Here, we are ready to act very harshly.”
MP of the Bloc of Communists and Socialists Petru Burduja said that the Republic of Moldova faces such a wave of inflation for the first time in the past 30 years. The group of which he forms part warned about such aspects back last autumn, when the budget for 2022 was examined. Some of the provisions generated instability for the business community and for the ordinary citizens. Responsibility is borne not only by the central bank, but also by the Ministry of Finance and the Government that should formulate policies.
According to the MP, when the situation changed in the region, the population was in a state of shock and many people withdrew their deposits. “We consider the parliamentary majority’s plan to reduce consumption is not correct because the people hoped for better conditions, including for improved purchasing power and higher consumption. On the other hand, we come and say that we must economize now. What shall we economize on – the daily average consumption of the population, the average consumption based on luxury costs or the average consumption based on the maintenance costs of the same public institutions?” asked Petru Burduja, who is the deputy head of the commission on economy, budget and finance.
He noted that the Government should introduce instruments to regulate these things to a particular extent and to indirectly intervene in the consumption capacity, the business entities’ offer capacity.
Petru Burduja also said that the products imported from Ukraine, Russian and Belarus that disappeared from store shelves should be substituted with national products. The reorientation to imports from other countries will anyway generate increases in prices. The Government should intervene in the economic sector and take measures to regulate the supply and demand mechanism. Also, the Government should cooperate with the National Bank.
The public debate entitled “Prices and inflation considered from political, economic and social angles” was the 249th installment of IPN’s project “Developing Political Culture through Public Debates” that is supported by the Hanns Seidel Foundation.
