Tofilat: Debt Servicing Costs Rose from 1.5 Billion to 6 Billion Lei in Five Years

The level of public debt, currently standing at around 42% of GDP, is not the main problem for Moldova’s finances. The key vulnerability lies in the steadily rising cost of servicing the debt, former Moldova Railways director Oleg Tofilat believes. According to him, Moldova pays around 6 billion lei annually just in interest on loans. By comparison, in 2021, public debt servicing costs amounted to approximately 1.5 billion lei, rupor.md reports. “The fact that our debt stands at 42% of GDP is not particularly high. The problem lies in servicing that debt,” Tofilat said. He noted that interest payments significantly exceed the amounts the state is prepared to allocate to infrastructure development. The Union of Transport and Road Workers is advocating for an increase in the road fund to approximately 3 billion lei, but infrastructure projects can take years to approve, while debt interest must be paid on schedule. Tofilat identified the state budget deficit, estimated at around 23 billion lei, as another serious problem. In his view, in the absence of other sources of financing, the gap between revenues and expenditures effectively means further growth in public debt. “We have a deficit of 23 billion. This automatically means that our debt increases by 23 billion,” he noted. According to Tofilat’s forecast, the problem could persist into 2027. He believes the budget deficit could once again amount to around 20-25 billion lei, meaning the government would have to take on new loans. The expert also drew attention to the structure of domestic borrowing, particularly short-term loans raised from Moldova’s commercial banks. According to him, the need to regularly refinance such loans makes the state more dependent on conditions in the financial market. “It is not only the high interest rate, but also the short maturity. We have to borrow money for six months and then refinance it every six months. And that is a risk,” Oleg Tofilat explained. In the view of the former head of Moldova Railways, the state of public finances should be assessed not only through the ratio of public debt to GDP. The cost of servicing the debt, loan maturities and the need for regular refinancing are equally important, particularly against the backdrop of a budget deficit amounting to tens of billions of lei.