By increasing the key rate, the National Bank of Moldova is discouraging loans, including investment ones, explains the economist Veaceslav Ioniță, of the IDIS Viitoru think-tank. According to him, the measure has led to a 70% increase on average in the interest rates on new loans granted by commercial banks this year.

The central bank recently raised the key rate to 21.5%, this being the tenth increase this year. “The last time we had a base rate higher than today was in December 2000, when the Republic of Moldova was going through a deep crisis related to the depreciation of the national currency and had extremely high inflation. Later on, it decreased. There were several hikes, but we never reached 21.5%”, noted Veaceslav Ioniță.

Whereas last year the average interest rate was 6.8%, now it has reached 11.3%. If last year consumer loans were offered at an interest of 4.4% the lowest, additional fees excluded, now they are offered at 13.7%. For individual entrepreneurs, loans have become more expensive by 50%. For individuals buying real property, loans have also become more expensive by 50%, and for entities, by 27%.

The economist says that the more expensive lending affects the Government the most, which this year has to deal with the largest budget deficit ever. This deficit needs to be covered from foreign loans, which are late to materialize, as well as domestic loans.

According to Veaceslav Ioniță, the Government has made the decision to not borrow from Moldovan banks, because the interest increased from 5.53% last year to 20.5% today, a whopping 270% surge. “Money has become more expensive for the Government, compared to the consumer loans for the population, followed by the loans granted to the whole population, but for purposes other than consumption. And for businesses the interest rate increase is the lowest”.

Meanwhile, interest rates for savings accounts increased as well, from 3.5% last year to 11.4% today.