​EXORBITANT CORRUPTION REPELS IMF FROM MOLDOVA– MIHAIL POISIC

In an interview to Infotag, Doctor of Economics, leading specialist of the National Institute of Economic Research of the Moldovan Academy of Sciences Mihail Poisic said that the Government knew about the situation in Banca de Economii (BEM) back 6 years ago but did nothing about it, and explained why the International Monetary Fund (IMF) and other Western donors do not like the Moldovan authorities’ life against all rule.

Question: Mr. Poisic, foreign donors completely stopped the financing of the Moldovan budget in mid-summer 2015, explaining this not even by the absence of a full-fledged Government, but by the absence of a new Memorandum with the IMF. On which conditions a new cooperation program between the Moldovan Government and the Fund can be signed?

Answer: The previous Memorandum exhausted itself in 2013. The absence of a new agreement is a signal to everyone, primarily to Western donors, that the country lives contrary common precepts of the civilized world. But there is also another negative factor, about which many Moldova’s foreign development partners, including World Bank (WB) experts, are speaking loudly and with an obvious disappointment – this is the growing, out-of-limit corruption, which pervaded in all the pores of society and state power’s activity.

Q: What can the IMF Memorandum include?

A: During their previous visits, experts of the IMF mission have explained in detail Moldova’s homework, after the fulfillment of which the Memorandum can be signed. These points are well known and concern the reduction of budget expenditures and a whole range of reforms. However, so far the authorities are more talking about this than do something.

Q: Can the banking element become central in requirements for the Memorandum with the IMF, when the Fund will lay down conditions to liquidate the three problematic banks and ensure a transparent corporative management in the rest of Moldovan banks?

A: This is only one of conditions. The IMF mission was unequivocally warning back in 2013: “The financial situation in BEM worsened in mid-2009 (that is six years ago) as a result of fraudulent crediting with participation of BEM internal audit and legal departments, as well as due to a dysfunctional approach of the BEM Administrative Board”. However, further developments demonstrated that the authorities’ reaction to this tongue-lashing was zero.

And now, instead of imprisoning persons, involved in stealing billions of lei, it is created only the appearance of the looking for the stolen money. In particular, the authorities started loud arrests of people on other smaller and insignificant fraudulent episodes. In all these stories there is only one thing that rejoices: the scale of corrupt actions, ignored by Moldovan authorities, has been finally observed by external development supervisors of Moldova.

Q: Whether the large state budget deficit can become critical for Moldovan economy and for signing by the new Government of the Memorandum with IMF”

A: The deficit is huge – 4 billion lei at the planned revenues of less than 30.5 billion lei. We also have to take into account the fact that the budget revenues include also financial infusions from the West. Only grants are worth 2.8 billion lei, a part of which has already been suspended. Thus, the real deficit of the budget is even larger.

Q: Which can be the figure of budget deficit, recommended in the new Memorandum with the IMF?

A: Of course, this will become a separate topic of discussions between the two sides. At least, the deficit should not exceed 3% of the GDP. By the way, according to many authoritative forecasts, the latter will decline in Moldova by 2% as a result of recession.

Q: The IMF Memorandum will mean a direct financing of the budget, or it will not have a financial component?

A: The fundamental for Moldova is not the IMF financing, but the signing of a Cooperation Memorandum with the Fund, which will open the access both to credits of other financial organizations and to different foreign grants, without which Moldova risks serious financial shocks.