Members of the Moldovan parliament’s committee for economy, budget and public finance have refused to debate the bill, submitted by the government under emergency procedures, on the payment from the public budget of the emergency aid provided by the central bank to three banks from which $1bn was siphoned off.

On June 13, Moldova’s government endorsed and submitted to lawmakers for approval a bill on the planned issuance of MDL13.6bn (€610mn) of government bonds, which the government will use to repay the central bank for emergency aid extended to the three troubled banks in 2014-2015. The service of the 25-year bond is estimated at 0.5% of GDP during 2017-2019, for 5% interest paid by the government.

Lawmakers have called for public debates on the issue which, given the population's anger over the thefts in the banking system and low living standards, means de facto rejection of the bill. The lawmakers’ move, announced by the leader of the opposition pro-Russian Socialist Party Igor Dodon who is a member of the committee, has a political dimension as well. Presidential elections are scheduled for October 30 and Dodon is the leading candidate.

The ruling coalition has been publicly blamed for the frauds in the banking system, but opposition pro-EU parties such as the Liberal Democratic Party of Moldova (PLDM) are also associated with the frauds, since they were members of the ruling coalition at the time they were committed.

Technically, the rejection of the bill by the committee creates legal complications. The central bank extended the emergency loans after receiving government guarantees. Failure to have the guarantees endorsed by lawmakers will put the central bank in a difficult situation.

In March, the government and the central bank signed a memorandum of understanding on the conversion of the emergency aid extended to three troubled banks into government bonds. The banks received MDL13.6bn (€610mn) of aid - equivalent to 11% of Moldova’s GDP - from the central bank with state guarantees in 2014 and 2015.

The government required lawmakers to review and vote on the bill under emergency procedures. The volume of the bonds will be adjusted if any funds are recovered from the three troubled banks, the government said.

Liquidation procedures have been launched at the three banks - Banca de Economii, Banca Sociala and Unibank.

The bonds will have maturities of between one and 25 years and the coupon was set at 1.4% for maturities of one to nine years and 5.3% for longer maturities. The coupon paid by the government on the bonds was calculated based on the central bank’s inflation targeting policy, under which the monetary authority envisages long-term inflation of 5% p.a., the government explained.

Based on the latest GDP forecast from the ministry of economy, and on the schedule of the maturities and coupons planned by the government, the service of the bonds would cost 0.5% of GDP in 2017-2019.