Moldovan lawmakers endorse 2016 budget in two of three planned readings

Moldovan lawmakers endorse 2016 budget in two of three planned readings
By Iulian Ernst in Bucharest June 10, 2016

Moldovan lawmakers voted in favour of the government’s 2016 budget in two readings on June 9. The main budgetary indicators including a 3.2% of GDP deficit, despite uncertain financing resources, were approved by 55 of Moldova’s 101 MPs, the online version of Jurnal daily reported. A third and final reading, during which MPs will vote on a minor redistribution of funds among state institutions, is expected soon.

Opposition lawmakers have harshly criticised the document that, they say, does not include any stimulus. Another of the key issues spotted by the opposition is the external financing of the deficit, which depends on the signing of a new agreement with the International Monetary Fund (IMF). The government admits this is a risk but assured MPs that the agreement will be signed shortly.

The government projects gross MDL6.5bn (€290mn) foreign loans (net MDL5.3bn), MDL0.3bn revenues from privatisation and MDL0.2bn from net issuance of bills and bonds on the local market. It also expects the European Union to extend a MDL3.6bn grant, which includes two-year disbursements.

Regarding the external borrowing, the government expects €110mn ($119mn, or around MDL2.4bn) of the €150mn loan extended by Romania, meaning the first two tranches, to be disbursed by the end of the year. The government also expects the World Bank’s International Development Agency to extend a $95mn loan for budget deficit financing and for reforms in the education, healthcare and social security systems. Moldova also expects loans from the European Bank for Reconstruction and Development (EBRD) of $37mn and European Investment Bank (EIB) of $42mn.

The grant extended by the European Union will double in size this year, since the disbursement was postponed last year due to the political turmoil in Moldova. Thus, the MDL3.6bn EU grant will critically account for 11% of the budget revenues or 2.7% of GDP.

An IMF mission will visit Moldova to “initiate discussions on a possible IMF programme” on July 5-15, the IMF announced in a June 9 statement. The IMF visit in early July marks the beginning of the discussions on the programme that seems to be critical for the financing of Moldova’s budget this year.

The mission will initiate discussions on the possible IMF programme, and will seek to reach agreement on a comprehensive set of policies that would maintain macroeconomic stability, improve governance and transparency in the banking sector, and foster sustainable and inclusive growth, the IMF press release specified.