Democratic reforms in the economy are being curtailed, while the government are returning to the tried-and-tested schemes of the Voronin-Plahotniuc era. And all this amidst a sharp drop in budget revenues and peak expenditures on servicing foreign and domestic loans
A while ago, the Ministry of Economy headed by “reformer” Dumitru Alaiba made a remarkable proposal to establish a state monopoly on the market of scrap metal and other strategic sectors of the economy. According to the plans, an enterprise or a group of enterprises will be given the exclusive right to collect and sell this raw material for its only consumer in the country - the metallurgical plant in Ribnita. Of course, the government introduced this initiative as a manifestation of caring for its citizens and the budget, but for the investment climate in the country it is tantamount to frosts during the blooming period.
Need I remind you that liberalizing the scrap metal market and struggling the state monopoly with its dubious schemes was one of the main election promises of Maia Sandu and the PAS party in 2019. And that until last year private entrepreneurs were promised a reform to liberalize the ferrous and non-ferrous metal waste market.
Back in the day, communists from Vladimir Voronin’s party explained the need to create a monopoly in the collection and supply of scrap metal by total lawlessness existing there, such as the pervasive theft of metal constructions in infrastructure facilities, from power lines to sewer manholes. The real goal, however, was clearly to establish an intermediary between the scrap metal collection companies and the metallurgical plant in Transnistria. That is, to buy raw materials on the right bank low and sell to the left bank high. This simple scheme made a lot of money, most of which went into the pockets of its supervisors.
When the state monopoly represented by Metalferos was in power, the purchase prices for scrap metal on the right bank were significantly different from those on the left bank. However, even this did not temper officials, who demanded extra payments from the Moldova Steel Works (MMZ) and even blackmailed the plant with the threat of blocking the raw materials’ supply. Now Maia Sandu’s regime wants to exploit these good old schemes of the Voronin-Plahotniuc era. After successfully managing the farmer protests, the authorities are apparently not afraid of the reaction of disgruntled scrap metal collectors or business representatives in other spheres that the ruling party will have its eyes on.
Noteworthy, attempts to tighten the fiscal burden on businesses on both sides of the Dniester are taking place amidst a decline in VAT revenues for the second quarter in a row and a doubling of expenditures on external debt servicing. The situation with the domestic public debt is similar, where a record high of almost 39 billion lei has been fixed. In the first half of the year alone, the amount spent on its payments was comparable to the expenditures for the whole last year - about 2 billion lei.
Why is that? Apart from the obvious reduction in real consumption and the shrinking of the national economy, such dreadful indexes are connected with the withdrawal of some businesses into the shadow, the practice of bogus VAT refunds, and the growth of smuggling. The multi-billion loans issued last year did not have a positive impact on the economy, but they already require considerable efforts to service them. Hence the increase in the tax burden and the intention to monopolize entire sectors of the economy.
The National Bank’s assets are still untouchable. The regulator’s foreign exchange reserves are breaking all records, exceeding $5 billion. This increase was just the result of external loans from the International Monetary Fund, the EU and other donors, which now have to be repaid. There is no doubt that the next in line to be “reformed” by cutting expenditures will be the education and healthcare systems, which traditionally require large budgetary resources.
It’d be better for our authorities to be mindful of the sad example of Greece, which once fell into a debt trap by keeping corrupt mechanisms of economic management and fictitious statistics. But the ruling party continues to insist on the benefits of Moldova being in such a predator-prey relationship. Even the decisions to send the EU funds designed for the programs with Russia and Belarus to Moldova are presented by our government as Brussels’ recognition of its achievements.
Quite shameful are also the attempts to return to the country the money stolen during the theft of the billion. European partners, even in the case of documented confirmation of such assets, refuse to hand them over directly to the Moldovan government. For instance, the Swiss authorities appeared ready to return the few funds identified as Moldova’s only by channeling them through their targeted relief programs. This approach is understandable for rogue states under international sanctions or African military regimes, but not for an EU candidate country.
If we take a look at the credit conditions imposed on our country and the attitude towards requests to return stolen assets, we can sadly admit that Moldova is not approaching equal relations with European partners, but is rather turning into their subservient province. And all this happens amidst a terrible economic recession, which the ruling party is only accelerating by its actions.