Moldova's national debt is growing, and servicing it is becoming increasingly expensive. As of the end of September 2026, the government owed creditors 150.36 billion lei—an increase of 17.58 billion lei, or 13.2 percent, compared to the beginning of the year. In 2025, servicing the national debt cost the budget 4.27 billion lei, and 6.51 billion lei has already been budgeted for 2026. This is 52.5% more than last year's actual expenditures, and this figure refers only to interest and fees, excluding principal repayments. At the same time, yields on new government securities in the domestic market exceeded 12% per annum. The government continues to increase borrowing, but an ever-greater share of funds must be allocated to servicing previously accumulated obligations. The more expensive new loans become, the less flexibility future budgets will have.
According to the Ministry of Finance, as of the end of 2025, total public debt stood at 132.78 billion lei, of which 80.78 billion lei consisted of external obligations and 51.99 billion lei consisted of domestic obligations. By the end of September 2026, external debt had risen to 90.18 billion lei, while domestic debt had risen to 60.18 billion. Over the course of nine months, external public debt grew by 11.6%, and domestic debt by 15.7%. It is precisely that portion of the debt—whose new issuances are currently particularly costly for the government—that is growing the fastest.
Initially, the 2026 budget allocated 6.17 billion lei for public debt service. However, during the September budget adjustment, expenditures were increased by another 342.8 million lei (5.6%)—to 6.51 billion. These are projected figures, whereas the 4.27 billion lei for 2025 represent actual expenditures. Nevertheless, a comparison shows just how significantly the budgeted cost of debt service is increasing.
Domestic debt is becoming particularly vulnerable. At the auction on November 3, the yield on 182-day government treasury bills was 11.63% per annum, and on 364-day bills, 12.61%. As recently as October 15, similar securities were issued at 11.07% and 11.70%, respectively. Thus, in just a few weeks, the cost of new borrowing rose by 0.56 and 0.91 percentage points.
On November 5, the National Bank of Moldova raised its base rate to 11% per annum. The decision is aimed at curbing inflation, but at the same time leads to higher borrowing costs in the economy. The base rate affects the yields on government securities.
The problem is exacerbated by the structure of domestic debt. As of the end of September, out of 60.18 billion lei in domestic debt, 47.52 billion lei consisted of short-term obligations—nearly 79%. Consequently, public finances are becoming increasingly dependent on regular borrowing in the market. The more obligations that must be repaid or refinanced in the short term, the more sensitive the budget is to changes in interest rates.
The scale of the risk can be illustrated by a simple calculation. If the government refinances 10 billion lei in annual obligations at a rate one percentage point higher than before, the additional interest expenses for the year will amount to about 100 million lei. If the rate rises by three percentage points, the cost would be 300 million. This example illustrates how quickly rising borrowing costs can increase the burden on the budget.
External public debt has a different structure. A significant portion of loans from international financial institutions is provided for longer terms and under conditions that differ from those of domestic market borrowing. However, currency and interest rate risks remain.
But what does the economy get in return for this growing debt? Borrowing can be justified if the funds are directed toward infrastructure, energy, enterprise modernization, and other projects capable of ensuring economic growth and generating additional budget revenue. But if new loans are used primarily to finance current budgetary needs, dependence on borrowing may increase.
The results of the audit by the Accounts Chamber are indicative. In 2025, Moldova received 12.2 billion lei in external government loans. Of this amount, 9.3 billion lei, or 76%, was allocated to support the state budget, and only 2.9 billion lei, or 24%, went toward investment projects. In other words, for every leu of external loans directly allocated to investments, there were more than three lei of total budget financing from loans.
In other words, the majority of external borrowing is not tied to specific investment projects. The Accounts Chamber draws attention to the risk of external debt transforming from an instrument of economic development into a mechanism for financing budgetary needs.
Another inconsistency emerged during the September budget adjustment. Initially, 11.4 billion lei in capital expenditures were planned for 2026, including more than 3 billion lei in capital investments for specific projects. However, funding for projects from external sources was reduced by 959 million lei due to the expected underutilization of funds by the end of the year. This is equivalent to 8.4% of the initially planned capital expenditures, although the reduction applies only to externally financed projects. Herewith, public debt service expenses were increased by 343 million lei, or 5.6 percent—from 6.17 billion to 6.51 billion lei.
It is telling that the government is unable to utilize part of the allocated funding for development, while expenditures on servicing accumulated liabilities must be increased.
At the same time, following the September adjustment, the budget deficit for 2026 rose from the initial 20.9 billion to 23.07 billion lei, approximately 5.95% of GDP. The government plans to spend significantly more than it will receive in revenue and grants. The difference must be financed, in part through new borrowing. Meanwhile, a portion of the funds raised is used to repay previously accumulated debt.
The situation is somewhat reminiscent of the financial behavior of a private borrower who takes out a consumer loan, then another one to pay off the first, and then yet another to settle the second. Formally, the borrower may meet their obligations on time for years. But gradually, an ever-larger portion of their income goes toward interest payments, and their ability to reduce debt or invest in their own development becomes increasingly limited.
Public finances are more complex. The government has tax revenues, an economic base, and the ability to implement fiscal policy. Furthermore, debt refinancing is a common practice for many countries and does not in itself indicate financial insolvency. However, a debt trap can arise even without an immediate threat of default: when new borrowing becomes increasingly expensive, and a significant portion of future revenues is already earmarked for meeting previously assumed obligations.
Ultimately, the sustainability of public finances is determined not only by the ability to secure another loan, but also by how effectively borrowed funds are used. If they foster economic growth and increase budget revenues, the government gains additional capacity to service its debt. If, however, new loans are primarily used to cover current expenditures and repay existing obligations, there is a risk of falling into a debt trap, where an ever-increasing portion of budgetary resources goes to creditors rather than to the country's development.
Today, Moldova continues to service its public debt. However, the increase in the debt and the rising cost of new borrowing raise the question of what share of future budget revenues will have to be allocated to payments to creditors and how much funding will remain for economic development. // 11.11.2026 – InfoMarket.