The initiative to abolish the so-called the “billion law” is populist, it will negatively affect the budget and jeopardize any efforts to attract external financing to Moldova due to the long-term consequences for the country's image - Expert-Grup.
This was stated by experts of the Independent Analytical Center, warning politicians about the extremely negative impact of the abolition of the said law on the macro-financial stability and the country's image from point of view of creditors and investors, noting that the consequences of the adoption of this law could be similar to the "embezzlement of a billion" itself, and also urging the political class to refuse from this and other schemes that threaten the financial system and the state budget, and focus on solving the essence of the problem, namely, investigating the “theft of a billion”, bringing the perpetrators to justice, and returning the stolen money from the banking system. Explaining their position on the law approved in the first reading on recognizing as invalid the law on the issue of government bonds performed by the Ministry of Finance of payment obligations arising from state guarantees of November 17, 2014 and April 1, 2015, experts noted that a direct consequence of the cancellation of the “law on a billion ”is the decapitalization of the National Bank, which will create new pressure on the state budget. This measure will bring losses to the NBM in the amount of about 13 billion lei, which will lead to a reduction in its authorized capital to about 10 billion lei. As a result, according to Article 9 of the Law on the National Bank of Moldova, the government represented by the Ministry of Finance will be obliged to make a monetary contribution for the recapitalization of the National Bank. “Thus, the abolition of the“ law on a billion ”does not relieve the burden of this debt from the shoulders of the population and taxpayers, since the Central Bank will have to be recapitalized at their expense," the Expert-Grup said. They stressed that the cost of lending for Moldova will grow against the background of increasing country risks. “The measure itself creates an extremely dangerous precedent, according to which the state at the highest level refuses its financial obligations: the fulfillment of guarantees issued on term loans provided by the NBM to bankrupt banks in 2014-2015. Without going into details about the possibility of issuing these guarantees, the very fact that the state will abandon its own guarantees after the fact will fundamentally undermine the credibility of existing and potential creditors in the country (financial institutions and investors will be much more careful when financing Moldova, having a precedent when the state does not fulfil its previous financial obligations). This will raise interest rates on government securities, as well as increase interest rates on other potential loans to Moldova, as lenders / investors will increase the country's risk premiums. In these conditions, it will be even more difficult to recapitalize the NBM at the expense of the Ministry of Finance, since the interest rates on government securities that will be issued in this regard will most likely exceed the 5% rate currently applied to public debt to the NBM under the “law on billion ", - said analysts. In their opinion, the country's relations with development partners will be significantly affected, which means that Moldova will receive less concessional financing for economic and social projects. The possible cancellation of the "billion law" will become a kind of crossing the "red line" in relations with the IMF, the European Union and the World Bank. Such an episode would jeopardize the prospect of signing a new Memorandum with the IMF, which, down the chain, would jeopardize the funding of other strategic development partners. Accordingly, this will deprive Moldova of important financial sources, which are so necessary during the pandemic and after the pandemic. Expert-Grup draws attention to the fact that persistent promotion, without the approval of the relevant institutions, of such a controversial draft law raises even more questions regarding the intentions of the authors. This is the second attempt to abolish the "law on a billion." The first one took place on December 16, 2020, when 56 deputies from the Socialist Party of RM and the parliamentary platform “For Moldova” adopted a bill abolishing the “law on a billion”, which was later suspended by the Constitutional Court and then canceled. "It is unclear why they insist on re-promoting such a controversial bill, in the absence of the government and the National Bank's conclusions, as well as against the background of the interim government, which again raises doubts about its constitutionality," experts said. Based on their above position, they warned politicians about the imminent risks of the initiative to repeal the "law on the billion." According to Expert-Grup, the only way to reduce the burden on the state budget associated with the implementation of guarantees issued by the government in 2014-2015 - is to speed up the investigation and bring those responsible to justice. “This should be a source of compensation for losses for the economy, which later will allow the government to repay the debt to the NBM ahead of schedule, actually freeing the population from this burden,” the experts emphasized. At the same time, they confirmed the mechanism of early repayment of debt to the NBM proposed by Expert-Grup in 2016 as a result of the activation of the “law on a billion”, according to which all proceeds from the sale of assets and the execution of collateral by bankrupt banks, and subsequently proceeds from the collection of stolen the money will be used exclusively for early repayment of the corresponding debt. In parallel, the process should be as transparent as possible, and government officials should regularly report to the public on the progress of the investigation and on the return of stolen money. “Any deviation from these priorities is dust in the eyes, political games and, in fact, a disruption of real efforts to put an end to this shameful episode in the country's modern history -“ theft of a billion, ”said the Expert-Grup.// 12.04.2021 — InfoMarket
