Publications of the part

Between the Elections and International Monetary Fund

Between the Elections and International Monetary Fund

Comments of InfoMarket Agency

It seems that Moldova doesn’t need a parliament, since the government is not counting on Parliament and takes sole responsibility for the development of new laws.

This type of practice, when the government takes responsibility and accept particular law amendments began in July 2014. There were accepted 11 amendments to the law and another 7 amendments in October 2014. The first case occurred when the Parliament was on vacation in July, another case when 7 amendments were accepted in October due to the start of Parliament election campaign, considering the absence of major part of the Parliament. Those actions of the government had some common sense. What about current situation? The existing ministry of government officials has been elected by the Parliament, meaning, it has the support from the Parliament. So what was the purpose to accept 7 amendments urgently at the moment when Parliament already available for autumn-winter session and ready to work?

It is considered to be a bad practice when government develop and execute the law. However, the government had that type of practice numerous times after 2014, which allow to by-pass the Parliament proceedings. As soon as the necessity to accept contentious amendment arise, the government put themselves into the risky situation to lose their credentials in order to push upstairs an amendment without Parliament approval.

IMF was the subject of it at this time. It is hard to give a logical explanation and justify the actions of the government from juristically point of view. Moreover, the work flow chart with IMF is established from the spring.

The fact it happened proves the disregard of the Parliament, considering the eve of the president’s election campaign (it will begin on October 30th) and disagreements of some political leaders, makes it an easy task. The unity achieved before the approval of the current Cabinet is unlikely. This is one of some versions. The fact that three of the seven law amendments were successfully adopted by Parliament at first reading is in its favor. The amendments could very easily go through the second reading if not the election. And one more argument - the Cabinet when it becomes a legislator is confident in resistance (lack of unity in the government would have sent them into retirement), there wasn’t failure for the government within three years.

Another version the amendments pushed by the government were very controversial, active discussion of which would be disadvantageous for many people involved in the presidential race, and could compromise the adoption of those amendments despite the fact the amendments must have been taken. It was demanded by IMF after all, it would open many doors for financial contributions —  "a hug from development partners". In addition, the country's parliamentary platform would become the scene of the election, taking into consideration the number of the deputies involved in presidential election race.

One of the controversial amendments to put it mildly, is the law on the issue of government bonds worth 13 billion and 583 million 717 thousand lei. The money (under responsibility of the government and bypassing the Parliament) were borrowed at the National Bank, when it was necessary to save the situation with Banca de Economii, Banca Sociala and Unibank.

Government bonds will be valid within 25 years! Available in 25 issues with maturities from 1 year to 25 years. The papers with maturity of 1-9 years issued under 1.4% per annum. The yield on securities with maturities of 10-25 years old is already 5.3%. In monetary terms, the total amount of the bonds is 13.6 billion and it will be paid 681.02 million lei from the budget for the first year!

Mathematically, the government will not only reimburse from the state budget 13.6 billion lei of issued securities within 25 years, but will pay out 11.5 billion lei in the form of interest as well. The result of the government's decisions — taxpayers of Moldova will have to pay 25.1 billion lei.

 

Maturity
(years)

The volume of
emissions

(Thousand lei)

Interest
rate

Interest on each
issue of
emissions 
for
the whole
circulation
period
(Thousand lei)

Interest on each
emission on the
annual pay-outs 
(Thousand lei)

Redemption of
interest,
amounts  
by
year 
(Thousand lei)

The total
amount of

redemption
and interest 
by
years
(Thousand lei)

1

50 000

1,4

700

700

631 017

681 017

2

210 000

1,4

5 880

2 940

630 317

840 317

3

230 000

1,4

9 660

3 220

627 377

857 377

4

240 000

1,4

13 440

3 360

624 157

864 157

5

260 000

1,4

18 200

3 640

620 797

880 797

6

290 000

1,4

24 360

4 060

617 157

907 157

7

310 000

1,4

30 380

4 340

613 097

923 097

8

330 000

1,4

36 960

4 620

608 757

938 757

9

360 000

1,4

45 360

5 040

604 137

964 137

10

390 000

5,3

206 700

20 670

599 097

989 097

11

420 000

5,3

244 860

22 260

578 427

998 427

12

450 000

5,3

286 200

23 850

556 167

1 006 167

13

490 000

5,3

337 610

25 970

532 317

1 022 317

14

530 000

5,3

393 260

28 090

506 347

1 036 347

15

570 000

5,3

453 150

30 210

478 257

1 048 257

16

620 000

5,3

525 760

32 860

448 047

1 068 047

17

660 000

5,3

594 660

34 980

415 187

1 075 187

18

720 000

5,3

686 880

38 160

380 207

1 100 207

19

780 000

5,3

785 460

41 340

342 047

1 122 047

20

840 000

5,3

890 400

44 520

300 707

1 140 707

21

900 000

5,3

1 001 700

47 700

256 187

1 156 187

22

980 000

5,3

1 142 680

51 940

208 487

1 188 487

23

950 000

5,3

1 158 050

50 350

156 547

1 106 547

24

950 000

5,3

1 208 400

50 350

106 197

1 056 197

25

1 053 717

5,3

1 396 175

55 847

55 847

1 109 564

TOTAL

13 583 717

 

11 496 885

 

11 496 885

25 080 602

* The calculation has been made by InfoMarket agency and may differ from the data of the Ministry of Finance and the National Bank.

Moldova will pay from its budget between $34 million and $58 million annually. It is unknown the source of the money to cover budget shortfall. Will there be any? – Is it the primary market for government securities or promised grants?...

Moldova is a country of miracles! And the miracles to be continued. The adoption of those seven amendments on Monday meeting (day of the week which the Cabinet almost never met). The second day, Tuesday, in addition to the regular issue of "Monitorul Oficial", special edition comes with new law amendments (only in the official language of the state - we can assume there was a shortage of time to translate into Russian). Although, you have to wait for months a new edition of "Monitorul Oficial" with law regulations, for some reason. If the Parliament does not express a vote of non-confidence to the government by Friday, the law amendments will be legally adjusted.

This means, as early as next week (seven days from the date of entry into legal force), the Ministry of Finance will issue the bonds and pass them to the National Bank. The National Bank, in turn, can sell 40% of the emissions on the secondary market (about 5.43 billion lei). What seems to be the problem to raise the bar from 40% to 100% afterwards?

It is challenging to note who might be interested in buying those bonds? Maybe it sounds crazy, but the Rothschild’s family members recently visited Moldova, they are known to buying up government debt of Ukraine vigorously... Maybe the urgency to implement the amendments is just associated with the recent visit of the respected billionaires? Yes, of course, all the deposits should be made in national currency in Moldova, but it is also reliable, since guaranteed by the state.

The law amendment is the possibility to issue the securities much earlier, so the pay-outs of the securities will be at the expense of the National Bank and profit must be allocated to the state budget. Early pay-outs can be carried out from the funds received from the sale of assets of the "three notorious banks". In addition, the National Bank reported that "Kroll" has found more than $600 million abroad if at least some portion of those "lost" funds will be returned to Moldova and the funds are not dissolved in the budget and its reserves, it would be amazing. It is important that all the money was returned, considering enormous royalties of "Kroll" it must be put into practice. There is an incentive to struggle for that "lost" money, instead of issuing long-term commitments, it's just too expensive for the state.  // 28.09.2016 — InfoMarket. 

News on the subject