The Democratic Party of Moldova does not spare money to prepare for the elections in 2019. The leaders of the Democratic Party of Moldova took the Pro-Moldova course and expressly demonstrate their success in the interests of the people. During 2018, the authorities launched a series of generous social programs: Good Roads For Moldova, First House, Doctor For You, New Life, etc. Sports Complex in Moldova Arena Chișinău. Moldova is also waiting for an unprecedented increase in public sector wages in 2019 and the construction of Arena Chișinau, the largest sports complex in Moldova.
An inexperienced observer can see that everything is fine: after many years of democratic reforms, the country has finally begun to develop, political power has become transparent, state revenues have increased, money has been allocated for building roads and increasing salaries. If you know how much election generosity of the Democratic Party costs in the current economic situation, the serene impression disappears. The mirage of the “new life” is dissipating - instead of it, the edge of an abyss appears, where Moldova is about to dive.
Many people are confident that the Republic of Moldova will face a financial crisis due to exorbitant costs in the spring of 2019.
The Cost of Generosity
Good Roads For Moldova in 2018-2019 will cost 3.6 billion lei - anyway, this is the standard burden on the budget to pay the project.
Other projects of the Democratic Party of Moldova require more money:
First House 600 million lei
New Life 74 million lei
Early reassessment of pension 228 million lei
Tax reform 2.8 billion lei
Arena Chișinau 282 million lei
Expenditures for these projects are not planned in the budget, and for individual reforms, the Democrats did not even provide clear expenditure figures. But the budget that will pay out this amount.
It is appropriate to recall in this case that 2018 recorded the largest deficit of the Moldovan public budget for the last 8 years. Its amount consistently increased from 1.3 to 5.5 billion lei in 2011–2018. Regardless of the income level, Moldova spends more and more every year, and the amount of debt is only growing. Even in neighboring Ukraine, with all its internal problems, the budget deficit in 2017 was significantly lower than in previous years.
Bare Figures
If we compare spending on the “gifts” of democrats to the population of Moldova, it becomes clear that their price is half the budget deficit, and all unplanned expenses need to be covered in any way.
According to the project, the revenues of the public budget of the Republic of Moldova for 2019 will be about 42.12 billion lei. 37 billion are taxes and fees, the remaining 5 are external grants. To finance unplanned expenses, the authorities will need to either raise taxes, or request financial assistance from abroad.
In fact, the opposite is true. Since 1 of October, the tax reform of the Democratic Party has started, and income tax, VAT and social fund contributions have even decreased for some categories of population. We also remember that the government intends to raise public sector wages by the end of the year, and it would be cynical to raise taxes having such a background.
Experts, opposition politicians and independent media are convinced that the democrats’ programs are “one-off” election campaigns, and the “new life” for Moldovans will last only until the elections. The first 6 months of 2019, we will enjoy relatively high salaries, and then, as it happens, the unexpected scenario will take place. There are a lot of options:
- inflation will increase;
- lei will depreciate;
- new governance will come and raise taxes;
- IMF will ban raising salaries.
The statement by the leader of the Liberal Democratic Party of Moldova Tudor Deliu that the authorities will again have to take loans from local banks to fulfil their promises to state employees is alarming. It turns out that all means are good on the eve of the elections, and the situation after elections can be described by a well-known saying.
The situation with external financing is not better. Public debt of the Republic of Moldova every year beats records. In 2019, its figure will be 62.8 billion lei, where 37 billion is external borrowing. The Republic of Moldova receives money from the IMF, the International Bank for Reconstruction and Development, the EU, the European Investment Bank, the European Bank for Reconstruction and Development and other organizations. A separate item are bilateral intergovernmental agreements on the provision of financial resources.
At the same time, it is well known that Moldovan sponsors pursue their own goals and require reforms, the provision of benefits, preferences and other bonuses in exchange for money. However, even here, Moldova has a reputation of an unscrupulous player.
Since 2017, the European Union froze the financing of Moldova postponing 100 million euros of macro-financial assistance for an indefinite period under various pretexts. Brussels is dissatisfied with the transition of Moldova to the mixed electoral system, its unwillingness to follow the requirements of the Venice Commission, the unsatisfactory results of the fight against corruption and the reform of justice. Subsequently, the cancellation of the elections of the mayor of Chisinau became a factor of tension. European structures openly said that Moldova will not receive money from the EU before the parliamentary elections.
When There Is Nothing to Lose
The Democratic Party, however, does not stop. The Moldovan authorities want to “decriminalize business”, conduct tax amnesty and start tax incentives. According to the representatives of the Democratic Party, these projects will only benefit: thanks to them, the punishments for economic crimes will be mitigated, and it will be possible to legalize property. At the same time, Moldovan experts are confident that the reforms will legitimize corruption and facilitate the “laundering” of the billion stolen from Moldova.
Initiatives are openly criticized by external partners, including the US, the EU and the IMF, but the Democrats do not stop, and the parliament again changes the electoral legislation and repeals the “day of silence” 3 months before the elections. According to the deputies, this will allow avoiding another annulment of the elections of the mayor of Chisinau.
It seems that the government of the Republic of Moldova is not even trying to change the situation. Without EU funding, the authorities have nothing to lose, which means that they will easily bring the situation to the limit. However, the patience of foreign lenders is not infinite.
Due to the “traps” of the new electoral system, the intensity of the upcoming struggle and the uncertainty of its outcome, Moldova will face many violations of democratic standards and “unplanned budget expenses”. Burdened by numerous domestic debts, the new authorities of the country – whatever they may be – will be forced to seek after the elections new support from the same foreign partners whose criticism they are ignoring today. And this assistance will definitely come – but under completely different conditions.
Having earned the reputation of an unreliable partner, Moldova is doomed to agree to any, even the most insidious conditions of foreign loans, where the population of Moldova will bitterly regret New Life and First House. The consequences of pre-election vicissitudes will surely be felt by Moldovans. The implementation of the projects by the Democratic Party of Moldova, as well as the payment of external obligations, will put a heavy burden on them. It remains to believe that the new elected authorities will be able to recover from the consequences of the inevitable financial crisis in 2019.
