Ionita: Moldovan Authorities Received $920 Million in External Support in a Year, Breaking the Record for 2021

The external financial support received by the Moldovan government in 2022 increases to 17.7 billion lei, of which 4.54 billion lei was received as grants and 13.16 billion lei as loans. Converted into U.S. dollars at the average exchange rate, external support to Moldova in 2022 amounts to $920 million, an increase of $400 million or 80% from the previous record set in 2021, unimedia.info reports. At that time, external financial support provided to the Moldovan government amounted to US$518 million. And compared to the 2018 low, external financial support in 2022 was 17 times higher. This is stated in an analysis by Veaceslav Ionita, an economic expert. Of the total external support, 25% came from grants and the remaining 75% from loans. The economist notes that foreign loans in 2022 became a “lifeline” for the government in conditions when the interest rate on domestic loans rose to 22-24% per annum. External loans have allowed the government not to increase domestic debt and even to reduce it somewhat. The high interest rates on domestic loans taken in previous years led to a huge cost of servicing the domestic debt. Thus, in 2022, interest on domestic loans alone amounted to MDL 2.16 billion. Under these conditions, the 2022 foreign loans allowed the authorities to save, in 2022-2023, at least 1.5 billion lei from the money needed to pay interests on domestic loans. If we go back to the grants, in 2022, they amounted to the maximum in the last 8 years. Ionita notes that the previous record was set in 2014, when the amount of grants received by the Moldovan government amounted to 288.2 million US dollars. The growth potential of external support in the form of grants is at least twice as high as the GDP capacity achieved in 2022. According to the expert, grants reached a share of 1.6% of GDP last year, 8.5 times higher than in 2018, or 5.5 times higher than in 2020. However, this is 2 times less than at the peak in 2014, when grants reached 3% of GDP.