Moldovan Finance Ministry presents draft austerity budget for 2015

Chisinau, 3 April /MOLDPRES/ - Economic Commentary by the State News Agency MOLDPRES

The government today will discuss the state budget draft for 2015, as well as the compulsory state insurances budgets and Health Insurance Fund, only three days after information that the documents were submitted for approval to the ministries and other interested institutions.

During a crisis year, the country's main financial law will be discussed and approved in a maximum emergency regime. At a government meeting on 1 April, Prime Minister Chiril Gaburici said the project would be approved "as soon as possible". This request is only natural. According to the law on budgetary system and process, the government must present the draft state budget for the following year to the parliament by 1 October of the each year, and the legislative body adopts the annual budget law by 5 December.

The parliamentary elections and dragging the formation of the government toppled the normal path a draft budget law should have followed. It is clear that its adoption of this law must be speeded up. But the fact that the draft was not consulted even with social partners triggers discontent. The National Confederation of Trade Unions showed concern with the fact that that "for the first time in the last six years" it was ignored by the government and did not receive the budget law draft.” Employers may be also in tune with the unions. The reaction of agricultural producers ,who demanded doubling the subsidy fund, up to 1.2 billion, may also be predicted. The budget draft provides for an amount of 610 million lei.

The Finance Ministry had a difficult task in drafting the document. The budget was built on more pessimistic forecasts than those of the last year, an economic loss of 1 per cent after 4.6-per cent growth in the previous year, an annual average exchange rate of the national currency of 19.5 lei per one dollar and an inflation rate of 7.6 per cent in the end the year. A 10-per cent decrease in exports and a 15-per cent one in imports is anticipated. 

What are the key figures? The state budget is set at revenues of 30.3 billion lei and for expenses worth 34.3 billion lei, with a deficit of 4 billion lei, almost y 2.5-fold more against the effectively recorded deficit in 2014. If we take into account the uncovered costs  or loans from the World Bank, on which we are counting, but not approved as yet, the budget deficit could be higher.

"The objective for which the draft budget is developed for 2015 is very difficult and tense, because economic developments translate directly on the national budget which, in its turn, cannot fully, efficiently and effectively serve as a tool for achieving policies", notes the Finance Ministry. According to estimates, government revenues will increase by 6.3 per cent in 2015 against 2014, while in 2014 the revenues increased by 15.1 per cent against 2013. The budget deficit this year will reach the level of 3.8 per cent of the Gross Domestic Product (GDP), compared to 1.75 per cent in 2014.

Under these circumstances, the government's task is to make sure that "limited budgetary resources be transparently and properly directed to settle urgent problems."

The budget for 2015, just like those of previous years, has a rather pronounced social character, with 65.2 per cent of the total public spending going to the social field. Economic expenses will account for 17.2 per cent of the public spending. The sums allocated from the budget for education, culture, health will increase, in terms of share of overall expenditure, will drop against the previous year. More money will go to the public order bodies, national security and defence. Spending for the state debt service will double up to almost 1.3 billion lei.

In 2015, expenditures for capital investments amount to 9.7 billion lei. Compared to the previous year, they decrease both as a share of total spending by 1.8 per cent, as well as against the GDP - by 0.3 per cent. The bulk of revenues (80.7 per cent) will be used for current expenses.

The Finance Ministry predicts a gradual increase of the monthly average wage on the economy by about 20 per cent, supposed to reach 5,400 lei in 2015.

Is there certainty that all the set targets will be achieved? "The macroeconomic forecasts and budget estimates underlying the budget draft for 2015 may be influenced by regional economic conditions, as well as the unfriendly international context, which shows no sign of improvement," says the report accompanying the budget draft.

The establishment of a collaboration programme with the International Monetary Fund (IMF), "is of major importance for the sustainability of the budget, both on short and medium terms," says the Finance Ministry. The lack of a programme could jeopardize the getting of an external budgetary support, the amount of which, in the state budget draft is about 2,238,1 million lei. Moldovan authorities have repeatedly declared that they wanted a new programme with the IMF. However, it seems that the talks could only as late as in next May, and negotiations and approval of an agreement with the Fund take a long time.

(Reporter: V. Bercu Editor: F.Galaico)