Munteanu’s Government Is Covering the Holes in PAS’s Pre-Election Budget

Munteanu’s government continues to cover up the disastrous results of the populist policies born under Maia Sandu’s previous administration, following the same pattern in which loud foreign-policy gestures distract from current problems and scandals. Thus, during yesterday’s cabinet meeting, seven international agreements concluded by Moldova within the CIS framework were immediately sent ‘under the knife.’ This was an entirely predictable decision against the backdrop of an inflated wave of discontent coming from a specific but influential segment of society, unhappy with what they see as an overly slow break with the ‘totalitarian’ East. After all, in recent months, the entire cohort of grant-funded journalists and experts has been asking ‘uncomfortable’ questions such as: Why can’t Moldova start throwing into the furnace batches of agreements tying it to the rudimentary remnants of the Soviet legacy represented by the CIS? Why not introduce a visa regime for all former Soviet republics that are not following the bright path of European integration? And so on. The persistent demands for decisive action coming from the active and financially incentivized segment of civil society have for decades served as a tugboat pushing the country in the ‘desired’ direction. This same factor also provides the authorities with a convenient excuse in front of non-European partners for adopting sensitive decisions. They say that the public is demanding it, while the government is allegedly trying to remain pragmatic and balanced. At the same time, when it comes to pro-EU initiatives, complete harmony can be observed. The latest visit to the country by EU Commissioner Marta Kos was accompanied by a whole series of media spin pieces praising the Moldovan leadership’s exceptional progress on the path toward the European family. In the presentation slides, the republic is shown as the leader in advancement for 2025. Even if the figures are only hundredths of a percent, the picture has been fixed. Success is on full display! Meanwhile, there were no negative stories in the media. No one bothered to look closely at the actual European Commission report on Moldova for this year, which clearly points out major shortcomings. This entire layer of so-called ‘independent’ expert and media structures also ‘failed to notice’ the breakdown in implementing the agreement with the International Monetary Fund. The latest tranche of $170 million (about 2.9 billion lei), intended to cover the budget deficit, never reached the country. The fact that our state is unable to pay public-sector salaries on its own is certainly discouraging, but it has been the reality of recent years. In the draft law on the revision of the 2025 budget presented yesterday by the Ministry of Finance, it is stated in dry bureaucratic language that the 3-billion-lei reduction in revenues is due to the completion of the IMF financing program. Officials immediately added that part of the lost revenue would be covered by another donor – the French Development Agency. Twenty-five million euros is, of course, not 170, but the authorities are in a hurry to calm the public and talk away the problem. Thus, former Finance Minister Victoria Belous, who is responsible for this failure, assured that the missing IMF loan has already been replaced with EU funds. The draft law itself does indeed mention that we have received the first tranche from the EU equivalent to 202 million USD, but this is mentioned exclusively in relation to the increase in external debt. In the section dedicated to compensating for the termination of IMF financing, there is not a single word about it. Instead, it notes that expenditures financed through external borrowing will decrease by 717 million lei, while expenditures covered by the state budget itself will increase by 886 million. It is quite possible that the EU funds can no longer be redirected to other purposes, and the officials’ assurances are merely an attempt to convince the public that everything is under control. One solid organization has supposedly replaced another, equally solid one. Furthermore, after all the numerical adjustments, everything appears quite respectable: state budget revenues will decline by only 0.2%, expenditures will increase by 0.2%, and the budget deficit will rise by just 304.7 million lei. The same Energy Vulnerability Reduction Fund, which is largely financed through EU loans, will be increased by 706.6 million lei. The motives for raising this expenditure item are unambiguous. The authorities speak of the need to complete the compensation program for household energy costs by the end of the year, with unclear prospects for the post-New Year part of the heating season. What does all this lead to? The ruling party is failing to fulfill the commitments it made to international partners. This situation is, of course, not new for us, but in this case it concerns the IMF – an international institution that all other major creditors look to. A negative verdict from the Fund – and we are clearly at odds with it – automatically results in reduced trust and a reassessment of policy by other lenders. One may accuse the IMF of cynicism or rigidity, but this institution will not engage in political speculation or cover for an irresponsible partner. If the requirements are not met, there will be no financing. If our authorities decided, in an election year, to dispose of loans and funds at their own discretion, then they should be prepared to plug budget holes with the help of other donors. This approach is entirely unacceptable to the authorities, who now perceive themselves as a privileged partner due to their involvement in the geopolitical standoff with Russia. The scandal over the failed lending program has brought the authorities’ grievances with the IMF to a new level. The organization is being accused of not promoting structural changes in the country, but merely deepening external debt dependence. They say it fails to take into account local specifics (so-called ‘hybrid threats’?), acting instead according to a rigid template. Each IMF tranche comes with strict requirements, such as cuts in budget expenditures, tax increases, and administrative and legal reforms that must be implemented quickly, or the funds will not be disbursed. Comparisons are made not only with the financial coercion imposed on Greece in 2010-2015, but also with the 1998 crisis in Russia. Incidentally, the harsh austerity measures that caused mass unemployment and recession in Greece were imposed not only by the IMF but also by the EU. There are also direct accusations of IMF interference in domestic affairs, including attempts to control state structures through loyal appointees (the National Bank, the Anti-Corruption Prosecutor’s Office). In short, the authorities’ stance toward the Fund is combative: “Provide the funds – or we will sever ties completely”. After years of clearly undue praise and a ‘blind-eye’ approach by Brussels officials to the growing lawlessness of the ruling party, the authorities have come to believe that their chronic domestic failures should be forgiven – and even encouraged. However, the example of neighboring Ukraine shows that inflated expectations and overconfidence in unlimited support from external partners – ‘no matter what’– can lead to disastrous consequences.