News Agency "Reporter.MD"
IMF Resident Representative in Chisinau:
"The most important thing for investments growth is to have a favorable
the relations with international financial institutions are frozen, the
government tries to promote it's own policies, which look different from what
had been suggested by the IMF. A number of questions and opinions have emerged
in this context. On one hand, government, parliament and presidency claim that
Moldova will manage without foreign financing, on the other hand, independent
economic analysts say the opposite.
October 29th, 2003, an IMF evaluation mission will come to Chisinau, and we
asked the IMF Resident Representative in Chisinau,
Mr. Edgardo Ruggiero, to
comment on the tasks of the mission, as well as to shed some light on a number
of issues concerning the relations between Chisinau and IMF and the economic
situation in Moldova.
Mr. Ruggiero, an IMF mission
will come to Chisinau in October, what will be its objectives and agenda?
International Monetary Fund Mission that will be in Chisinau from October 29 to
November 11 will not negotiate a new program with the Moldovan Government but
will only evaluate the economical situation, medium-term economic policies that
are going to be promoted by the government and the short-term and medium-term
economic development strategy. Again, the discussions will not be focused on the
program. We can think about this mission as an opportunity to take a break and
evaluate the situation.
It was decided five weeks
ago that this mission will not be headed by the mission chief for the Republic
of Moldova, Marta Castello Branco, who could not come for family reasons.
Mr. David Owen, IMF
Mission Chief for Russia, will come instead - he will arrive in Chisinau on
October 31. Rumors that Chisinau was thus placed in a zone closer to Moscow do
not have any grounds, David Owen being chosen because he had been a mission
chief for Moldova in the past and he knows the situation in the post-soviet
What will be the content of the
new IMF program, the conditions or the wishes of IMF, having in view the latest
declarations of president Voronin, according to which he was glad that the
external lending did not resume, and named, in that context, the Paris Club to
be a trap. At the same time, the Minister of Economy acknowledged that the new
program would not necessarily be a PRGF, but one in which IMF will not offer
For the time
being, we don’t know the content of the new program of the International
Monetary Fund. In fact, this will be a program of Moldova’s authorities, backed
financially by the Fund. This is very important, because I often see a wrong
perception, that the IMF imposes some conditions. Our conditions become as such
only after an agreement is reached with the government. As regards the PRGF
program (Poverty Reduction and Growth Facility) – it is a very advantageous one.
It carries an interest rate of 0.5 percent only, a 5.5-year grace period,
repayable over 10 years. Hence, money that Moldova received under PRGF were very
cheap. I don’t know the context in which president Voronin referred to the Paris
Club, that is why it is difficult for me to comment on it. But I can tell you
that nobody said that debt restructuring at Paris Club is an easy task. This is
Club of creditors – and just imagine that a country comes and says that it
cannot repay the debt now, it will do it later! Nobody says that this Club is
writing off debts, although some people in the street understand the things
differently. But those who know the mechanisms of Paris Club operation realize
that this will be just a debt restructuring… Nevertheless, in certain
circumstances the stock of debt of some countries is reduced. These are counties
that pursue sound economic policies. There were such cases. Moldova may qualify
for such a debt reduction, because it is a poor country, although poverty is not
an official condition. However, a request from Moldova will not be accepted from
the first attempt, but along with implementation of good economic policies.
It is known
that each new program provides for less financial resources, presuming that the
recipient country’s economy is developing. What would be the volume of credit
under the new program?
The volume of
the crediting depends on two factors: the first is the need of the country to
benefit by external financing and the second is the quality of the program that
will be financed by means of PRGF. At the moment we cannot know these things.
investments are very small in Moldova. What do you think is needed for
investments flows to grow. And in this context, how would you appreciate the
state of Moldovan economy, having in view that the communist MP, Victor Ciobanu
recognize that economy is near in an infarct, as in the pre-Russian crisis in
1998. will Moldova
get on its own this and the next year without external lending from the
multilateral and bilateral donors?
important thing for investments growth is to have a favorable business
environment. It’s interesting that people start asking what is needed in order
to make such an environment. It is difficult to define these things. One
significant thing is to eliminate the discrimination against foreign economic
agents. In this respect I can say that Moldova has rather good laws, the problem
is their implementation. The message that the corruption won’t be tolerated must
be transmitted. I must say here that the international definition of corruption
is referring to the Government corruption, in the state structures, but in
Chisinau this thing is mixed up with what is called fiscal evasion in the
private sector. Yet, the measures for combating these two practices are
different. For fiscal evasion we need efficient customs and fiscal
administration, and for the combating of corruption – an efficient judicial
system and very simple laws. In Moldova, there are complicated laws that allow
the customs officials, the fiscal system or the Ministries to impose their
decisions as they wish. For example, in order to open a non-governmental
organization, in many countries it is enough to put forward a request and if the
Government doesn’t react during seven days, the NGO can start its activity. In
the situation is completely different. So, in order to reduce corruption, they
must simplify the regulations.
be difficult for Moldova
to get over now without grants and financial help from outside. These will come
when the vector of the economic policies will allow, for example the European
Union, to allocate these grants.
you evaluate the 2004 Budget Law, allocation of expenditures, budgetary surplus?
Does the amount provided in the budget for servicing the external debt coincide
with the figure calculated by the IMF?
examine how the expenditures are distributed unless there is a special mission
in this respect and there is no connection with the surplus of the budgetary
incomes. Regarding the external debt, we operate with the same numbers as the
Government, The project of the budget for the next year has some positive
tendencies, as for example, the exemption from VAT in agriculture and medicine,
but there are some risks in this budget. It is possible that the incomes
estimated to come from the cancellation of the VAT exemption are too optimistic.
say that this is a crisis situation, we don’t believe so, yet there is no reason
to rejoice. The taxes can be reduced in such a way only when there is a
financial covering, and the Government must wait with the reduction of the taxes
on the incomes of the economic agents, as well as with the unification of the
taxes in agriculture. It would have been better to launch a pilot project in one
or two districts to estimate the results. Also we don’t believe that Moldova is
not ready to implement the new system of medical insurance. It will create new
prices for the enterprises which will have to pay contributions without knowing
for sure if there is a market for the medical services in Moldova. Many
countries tried to implement this system, but it takes a rather long time to
pass from the publicly financed system to the one through insurances. I think
they should wait for the results of the pilot project launched in July, in the
you mention that improvement of business environment is one of the IMF’s
requests. What do you think about the new hassles of Union Fenosa, both from
Moldelectrica and the State Energy Inspectorate, which look like orchestrated,
coordinated actions, and their impact on the business environment?
they seem to be orchestrated, coordinated but there are no proofs. The
impression some independent observers can have is that these things do not
advantage the business climate. If I were a foreign investor interested in the
energetic sector of Moldova,
I would have a lot of questions to put in order to understand what is happening
think that the structure of nominative compensations and the list of recipients
of this aid needs to be changed? People say that the parliamentarians are also
on this list, while people with high incomes benefit from higher compensations
than the poor people.
I think that
the entire system of social assistance from Moldova must be revised. And you and
I know poor people who do not benefit, for one reason or another, by social or
nominal compensations. This thing must be changed, even if we want to help the
poor people. We also know people who benefit by social compensations but they
shouldn’t. But it is not only about these compensations. If the price on bread
is kept at a low price, than everybody benefit by this, even I, although it
shouldn’t be so. The bread price must be free, and the poor people must have
access to social transfers,
money that will allow them to buy bread.
conflict in telecommunications between Chisinau and Tiraspol hurts both the
mobile operators and their customers. In your opinion, how this crisis could be
overcome. In this context, the groups of economic experts from Chisinau and
Tiraspol do not seem to make huge progresses in the negotiations. Have you been
invited to participate in negotiations or at least informed about the status of
relationship and Chisinau intentions with respect to the “transnistrian
The so called
war of telephones between Chisinau and Tiraspol should end as soon as possible
and the first step in this direction should be made by the side who threw the
first stone. But I do not know who had started this conflict. I was never
invited to negotiations, and in fact this is not our task to be involved in such
negotiations. We would like to be consulted when they will debate the economic
aspects, in order to understand what it is about and give recommendations to the
Government. The two things that we are mostly concerned are who will pay for
Тransnistria’s debt, that is much larger for an inhabitant than that from the
right bank of the river Nistru, and we also concerned by the fiscal relations
between different level administrations. Who and at what level will collect
certain taxes, what spending makes every level of administration, what transfers
will be allocated by the central Government to the local authorities; these are
very important rules that can ensure that the country that will result from the
union of the two banks of the river Nistru is viable from the economic point of
you assess the proposals made by the sides regarding the separation of powers in
the future Federal State in the economic and financial sectors, in particular
the differences regarding the number of central banks, customs and fiscal
I have seen
only some previous projects. But in every new state there must be a single
Minister of Finances, a single central bank, a single fiscal and customs
administration. Otherwise, it won’t be possible to administer the country from
the economic point of view.
Government refused some actions that have been agreed with the IMF after
crediting was definitely blocked and the program with the Fund has expired. For
example, cancellation of the deadlines for implementation of the pre-shipment
inspection. Are these actions going to be reinstated under the conditions of the
new program or you will refuse them?
We are far
from the discussions regarding this program and it is difficult to say what it
will contain. But there is the possibility that the old stipulations will be
included in the new program. I can say that it is not possible that the IMF will
finance a program that will foresee export restrictions, the control over the
prices or the establishment of monopoles without an economic justification.
been some time since returning to the raions, which was opposed by the IMF. Now,
what do you think now, was this new territorial reform a success or not?
I can give you
just one example of the impact of this reform. More foreign donors had been
training the officials from local administrations. Now, many of these people do
not longer work there and the investments made in human resources were totally
lost in some cases. However, the economy is going to adjust by itself and we
hope that this raion system will start working after some time and the people
will forget about these costs. Well, this was in the past and let us look in the
future, and the future in
Europe is that the regions are uniting to obtain more financing for
investment and infrastructure development projects. In this case all these sums
are going to be coordinated by the central government and not on a raion level,
i.e. the government will have more possibilities to make decisions which is
sometimes good. The life will show us.
Tarlev said that Moldova will need a lot of time and money to become a market
economy. In your opinion, what kind of economy Moldova has now?
I cannot comment
something that I did not hear since it could be taken out of the context. What I
can say is that the market economy is defined by several characteristics.
Currency exchange rate is free. Salaries or price of labor are free. Then, there
are prices of services and goods where we have some problems. More prices are
controlled, even if indirectly, through controlling the way how these prices are
formed, through setting some margins. The Government should decide how fast to
proceed with the liberalization of these prices if such prices do not result in
additional expenditures from the Budget or some economic inefficiency. Regarding
the services. There were a lot of discussions with the World Bank about the
tariffs of telephone calls and electricity. Usually, regulation is done by
governments under a transparent and agreed formula, here, however, there is not
a 100% optimal situation. Still, the system is moving towards a right direction.
In addition, there are some natural monopolies but there are economic activities
that do not need to be monopolized. Moreover, everyone should have the right to
export any product. People who are collecting scrap metal should pay the taxes
that they are supposed to pay. The solution would be not to impose restrictions
but to conduct correct fiscal inspections. Ten years ago, Moldova was much
farther from market economy, however, Moldova did surprisingly well after the
Russia crisis in 1998. The new Airport was put into service several years ago,
many supermarkets are opening. That is why there is necessary to make a lot of
investments in the infrastructure and this money will come on a convenient terms
if sound economic policies will be promoted.