The Government Owes the National Bank Hundreds of Millions of Lei

The National Bank of Moldova (NBM) continues to send requests to the government to fulfil its obligations and contribute to the capitalisation of the institution. The last public request appeared in October 2023, during the discussions on the draft approval of the Programme “Medium-Term Public Debt Management (2024-2026)”, in which the National Bank insists on “capitalising NBM under the conditions when NBM registered a capital level below 4% of the total number of monetary bonds”. The government is obliged to find 396 million lei The banking authority also refers to a letter sent to the Ministry of Finance on 21 July 2023 and to the provisions of the Law on the National Bank of Moldova. “The government, represented by the Ministry of Finance, is required to transfer to NBM a capital contribution of 396.15 million lei in the form of state securities at market interest rate, in the amount necessary to increase the share capital to 4.00 per cent of the total number of cash bonds of NBM, as well as with information on the impact of the repayment of legal obligations on the public debt,” the NBM management states. The National Bank believes that “the issuance and transfer of the authorised capital into state securities should be made in a single payment during 2023, i.e. the year following the registration of the amount of the authorised capital less than 4.00% of the total amount of the NBM cash bonds as of 31 December 2022”. In other words, the Recean government needs to find and allocate the sum of LE 396.15 million by the end of this year to replenish the NBM’s capital. Risks: undermining the NBM’s credibility, depreciation of the national currency The NBM argues the need to accelerate this capitalisation also because, in the context of simultaneous crises intensified in 2022, the institution “made efforts to mitigate the effects of shocks on prices, to maintain the balance that was observed under simultaneously restrictive conditions of monetary policy and stimulating conditions for economic growth, as well as ensuring financial stability and sustainability of the national currency”. “These efforts will lead, once the crises are overcome and the risks of external shocks are reduced, to a rapid economic recovery and the resumption of sustainable growth,” the NBM states. However, the monetary policy measures introduced in 2022 had a negative impact on NBM's profit and, consequently, on the capital level. Thus, last year, NBM recorded a total loss of 500.53 million lei, the capital level decreased to 3.52 per cent of the total amount of NBM’s monetary bonds, below the minimum level of 4.00 per cent. “The authorised capital is below the legal requirements and the failure to apply the legal provisions on increasing the NBM’s authorised capital may lead to a number of serious consequences, such as undermining confidence in the NBM and the national currency, depreciation of the national currency, impossibility to conduct an adequate monetary policy due to insufficient capitalisation,” the National Bank said.