The Difficult Story of the Russian Loan for Moldova: Is the End Near?

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Marina DRAGALIN According to the Moldovan President Igor Dodon, the country will receive the long-desired $ 200 million out of the Russian loan in early April. It's the right time to think what to spend this money on. The Russian credit plot has been “circulating” in the Moldavian media space since last year. Namely then, Igor Dodon stated Russia is to provide Moldova with an impressive credit line of half a billion dollars meant for a vast infrastructure projects implementation (primarily in the field of road construction). It is characteristic that Prime Minister Ion Chicu, traditionally more restrained in his statements, who was discussing this issue with the then Russian counterpart Dmitry Medvedev emphasized that it was only an intention and not a fait accompli. After first being stated, for several months fragmentary and often contradictory data flashed in the media. The president was confident that the loan deal was resolved and planned to ratify the relevant agreement during parliamentary session in February. The government, on the contrary argued that negotiations with Moscow were not over yet. The credit line amount also changed: from the indicated by Dodon half of billion it lowered to 300 million but afterwards to only 200 in the quality of allegedly first tranche. Russian officials in turn, preferred not to comment on the credit topic. At the same time, the terms for receiving money were constantly postponed. There may be many reasons for these delays. First, they are probably directly related to the political component, in particular, the coalition of socialists and democrats that has been outlined since last year and which Moscow has always opposed. Secondly, the coronavirus pandemic and the oil market war outbreak greatly affected the Russian economy making it face obvious difficulties: ruble devaluation; critical drop of “black gold” exporting which affected the state treasury revenue; quarantine of many small and medium business; etc. According to Veaceslav Negruta, Transparency International’s expert in Moldova, Russia faces serious problems with negative and long-term affecting the Russian budget consequences. “Tough measures will be taken to optimize costs as oil and gas revenues will be sharply reduced. For these reasons, obtaining the Russian loan is even less likely for our authorities,” Veaceslav Negruta stated. In addition, it is clear that given the internal crisis, the allocation of cheap loans to other countries carries image costs for Russian authorities and such assistance would be difficult to justify in the eyes of the population while current conditions. Nevertheless, in early March, after the next weekly meeting in the President-Speaker-Prime Minister format, Ion Chicu told reporters that the money would come from Russia (for 11 years and at 2%) and the corresponding agreement is to be concluded within seven days. A week later, there were reports that the Moldovan ambassador to Moscow Andrei Neguta was authorized to sign the loan agreement. “All conditions were discussed and it was decided to start negotiations and provide the authority for agreement signing to Mr. Neguta. The following days, this agreement is to be signed and ratified by governments and parliaments so that in early April the first tranche of $ 200 million is expected to the state budget,” Ion Chicu said. This time, the government and the president versions coincided. Last Tuesday, meeting with Russian ambassador Oleg Vasnetsov, Igor Dodon openly thanked him for fulfilling his promise and providing the loan for road repairs in the near future. He stressed that the Russian side has already made appropriate changes to the budget for the current year and the Moldovan authorities will soon make similar adjustments. Thus, despite all the forecasts and experts’ expectations the long-desired tranche from the Russian credit line will apparently reach Moldova in the near future. Therefore, it's time to think what exact goals will this money be spent on. Initially, they planned to use the Russian loan and implement a vast road construction, meant to become Igor Dodon’s entire election campaign “highlight”. At the same time, many experts saw serious risks associated with the corruption component during the tenders for these works’ execution. Since then, the situation has changed a lot. Yes, the country still needs good roads. However, it is clear that the new coronavirus infection pandemic has made its tough economic and demographic adjustments not only to the Moldovan future but to the future of the entire European space. Therefore, receiving Russian money the country's leadership faces a difficult choice. On the one hand, no one wants to abandon the planned infrastructure projects (it is believed that they planned to “feed” a lot of the rightwing people), without which the re-election of the incumbent president was not even designed. On the other hand, given the critical drop in budget revenues and the reduction in remittances from labor migrants (as well as their return to their homeland), it would be worthwhile to reorient if the agreement reached with Moscow allows credit facilities. For example, practical measures to combat the epidemic, expected unemployment, promote small and medium-sized businesses, long-term programs and investments that could help solve the problem of employment, etc. Now, the Moldovan future more than ever depends on Moldavan establishment’s ability to shift from electoral rails to strategic planning - otherwise there’s no guaranty that this very future, having nowadays structure is in principle to exist in our country.