IMF REGARDS ATTEMPT TO ABOLISH BILLION LAW AS A “BACKWARD REFORM” IN THE BANKING SECTOR

Rodgers Chawani, International Monetary Fund (IMF) Resident Representative in Moldova, described the legislative initiative of the deputies of the Party of Socialists (PSRM) to abolish the “law on the billion” as “an attempt to reverse the reforms begun in the banking sector”.

Commenting on this initiative at the request of the journalists, Rodgers Chawani expressed “the IMF Mission’s concern about the initiative.”

“The PSRM's proposals aim to reverse important measures taken after the bank fraud. These proposals could undermine efforts to improve the financial system of Moldova,” the head of the IMF's permanent mission in Moldova said.

He emphasize “the importance of maintaining the hard-won gains in strengthening the independence of the National Bank of Moldova (NBM), protecting the policy pursued by the NBM and maintaining the required level of capitalization of the NBM.”

“These are the most important elements of ensuring the effectiveness of the NBM in maintaining macroeconomic and financial stability. Actions that undermine the independence of the NBM or cancel the reforms supported by the Fund will complicate relations with Moldova,” the official stated.

The so-called “law on the billion”, adopted in 2016, was the only solution to the question of guarantees from the Moldovan government issued by the NBM in exchange for the provision of “urgent loans” by the bank. The regulator issued them in the amount of 14.2 billion lei in 2014-2015 for three problem banks - Banca de Economii, Banca Sociala and Unibank, from which $ 1 billion was withdrawn abroad.

Within the framework of the “billion law” adopted in 2016, the Ministry of Finance issued government bonds in the amount of “urgent loans” provided to these three banks and transferred them to the NBM. The law provides for the government to redeem bonds for 25 years.

Since the adoption of the law, the Ministry of Finance has been annually redeeming the NBM's bonds in the amount of 650-700 million lei on average. The ministry pays an interest rate of 5.5% on outstanding securities.