Opinion: Moldovan Authorities Risk Falling into the Trap of Unpopular Measures

The difficult situation with public finances, inherited from the regime of Vlad Plahotniuc, may push the new authorities to take tough anti-crisis measures – if an alternative recipe for supporting the depleted Moldovan economy is not found. Vladimir Rotar, RTA: The fact that the financial situation in the country is far from rosy is no secret, and only European remedy cannot cure chronic diseases of the Moldovan economy. Moreover, Moldova’s yet to get the tranches from the EU, and this is not as easy as it might seem. So far, the government has not disclosed any specific program of action in the economy. This is generally understandable – first of all, they must deal with the ‘rich heritage’ of the previous regime, on which the new authorities focused. The problem is that, judging by the conflicting public statements and chaotic actions, the ‘revolutionaries’ themselves do not really understand how to clear debris in the economy inherited from their predecessors. The point is that almost every project and program of the Democratic Party has its pitfalls associated with opaque schemes of intermediaries and beneficiaries, tricky conditions of their implementation or excessive media coverage. Their cancellation will threaten either additional financial losses or banal disappointment of the population. Like, for example, the sensational social projects of the PDM – the First House and Good Roads. On the one hand, they clearly worked for the election PR of the Democrats and were an unaffordable burden for the Moldovan budget. On the other, despite all their disadvantages, they still gave a tangible result: renewed infrastructure in the regions and housing for young families. So it will be difficult to explain to the population why they suddenly need to be canceled. The same thing happens with the citizenship for investment program, which Parliament hastily suspended. Everyone knows who received the largest profit from its implementation, but at the same time Moldova can lose not only additional funds from the ‘passport sale’, but also several million euros to pay the cancellation fee to the partner company. The uncertain steps of the new government in the economy are accompanied by growing rumors about the upcoming unpopular measures such as gas tariff increases and national currency devaluation, the substance for which is given by the authorities themselves. The situation is likely to worsen even more after the start of negotiations on a new IMF loan program. Given the critical situation in the economy (the Democrats created a huge hole in the budget, which were going to patch with Western loans), Moldova will clearly not be in a position to bargain for the best conditions. This is confirmed by the experience of neighboring Ukraine, which in order to get new IMF tranches this year had to increase gas tariffs dramatically and cut social payments. However, the new government now has additional opportunities to get things going right in the economy, which were not available to the previous regime. It’s about relations with Russia. Just a week after the overthrow of Plahotniuc, Deputy Prime Minister Dmitry Kozak visited Moldova again. The theme of the visit of the Russian official was markedly economy, and the leitmotif of his meetings with President Igor Dodon and Prime Minister Maia Sandu was the restoration of trade and economic relations. Moscow and Chisinau agreed to intensify the work of the intergovernmental commission for economic cooperation, as well as to increase mutual trade turnover. Eloquent evidence that the visit of the special representative of the President of the Russian Federation was a success was that the preferential regime of deliveries of Moldovan goods to the Russian market extended for the next six months. It is obvious that Russia, being one of the architects of the current ruling coalition in Moldova, has a vested interest in its success and is now extending a helping hand to the new government. In the current situation, it is important for Chisinau not to miss this chance to restore ties in the economy, which in the future promise considerable financial dividends. In the end, trade with Russia can become the lifeline and unused reserve that compensates for the difficulties of the transition period in the economy of Moldova. Another positive point is that the ‘reserve airfield’ in the form of a huge Russian market in itself strengthens Moldova’s position in negotiations with Western donors, giving it an additional field for maneuver. The Russian alternative may somewhat moderate their demands, allowing Chisinau to bargain on obtaining credit aid on better terms. Whatever it is, despite all the advantages of the moment, the situation remains ambiguous: for many years Chisinau has repeatedly put political interests over economic considerations, and this year will not negate the enormous dependence of Moldova’s economy on trade with the EU. Nevertheless, June 2019 showed that Moldova not only still has a chance to be friends with all at once, but it may for once become the only successful course for the state.