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State debt, a topic discussed within the meeting of the Court of Accounts

  • 26.05.2023
  • 507

The Court of Accounts of the Republic of Moldova, on May 26, examined the Compliance Audit Report on the management of the state debt, state guarantees and state recrediting in 2022.

The purpose of the audit was to assess the compliance of the management of the state debt, state guarantees and state recrediting in 2022, according to the provisions of the applicable regulatory framework.

As of December 31, 2022, the state debt amounted to approximately 94.7 billion lei, which compared to the previous year increased by approximately 16.9 billion lei, the level reached falling within the ceilings approved by the annual budget law.

Of the total state debt, the internal state debt constitutes 34.5 billion lei and the external state debt – 60.2 billion lei. As a share of GDP, the state debt is 34.73%, registering the highest value in the last 5 years.

For the service of the state debt (interest and commissions) from the state budget, financial means were paid in the total amount of about 2.6 billion lei, of which: for the service of the internal state debt – 2.1 billion lei and for the service of the external state debt 0.6 billion lei.

The total volume of foreign loan disbursements in 2022 was about 863.9 million dollars or the equivalent of 16.5 billion lei, of which 317.3 million dollars were disbursed to finance investment projects, and 546.6 million dollars as financial assistance to support the budget. Compared to the previous year, 341.9 million dollars more were disbursed from external loans.

During 2022, 12 new loans were contracted, with a total value of around 1 billion euros, which is twice as many loans compared to the previous year.

The audit mentions that, similar to previous years, the level of loan disbursement is low, the disbursement in some cases takes place late, as a result of which the objectives in the implementation of investment projects have not been achieved.

Thus, as of December 31, 2022, the Ministry of Finance reports 145 active loans, of which 41 loans had undisbursed balances, in the total amount of about 1.9 billion dollars, in some cases the level of capitalization still remains low, and in others no withdrawals have been made at all. The total amount of commissions paid cumulatively, for loans for which undisbursed balances were recorded, until the end of 2022 was about 21.5 million dollars.

In this context, the audit highlighted:

  • 10 loans for which the withdrawal deadline expires by the end of 2023, which recorded unpaid balances in the total amount of 281.2 million euros, for which commissions were paid in the total amount of about 6.3 million euros;
  • 4 loans with the disbursement term until the end of 2024-2025, the disbursement level being in arrears and constituting up to 15%;
  • 3 loans with a disbursement term until the end of 2025-2026, of which 2 were not withdrawn at all, and in 1 the disbursement level was 0.33%, at the same time service fees were paid in the total amount of about 1 million euro.

The Court of Accounts reported on 2 loans contracted from the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) in 2017, in the total amount of 160 million euros for the implementation of the Project "Interconnection of electricity networks between the Republic of Moldova and Romania", whose disbursement deadline expires at the end of 2023. Thus, for the loan contracted from the EBRD, in the amount of 80 million euros, the disbursement level is 1.81%, the undisbursed balance on 31.12.2022 being 78.55 million euros, for which commissions of 2.7 million euro were paid. The unpaid balance was canceled on 19.04.2023. At the same time, for the loan contracted from the EIB, in the total amount of 80 million euros, the disbursement level is 0%.

According to the explanations of the Ministry of Finance, the reason for the non-disbursement was the declaration by the external creditor of the unfeasibility of the Vulcănești station, for the rehabilitation of which funds from the given project were expected, the creditor proposing alternatives for the implementation. Until now, the beneficiary of the project has not received an official response from the external creditor regarding the cancellation of the respective Project or the redistribution of financial sources.

To service the external state debt in 2022, were used financial means from the state budget in the total amount of 142 million dollars, the equivalent of 2688.3 million lei, of which:

  • for the repayment of the principal amount – 112.5 million dollars, the equivalent of 2127.7 million lei and
  • for the payment of interest and commissions – 29.5 million dollars or the equivalent of 560.6 million lei.

Compared to the previous year, 329.8 million lei less was paid to service the external state debt in 2022, due to:

  • payment in 2021 of the first and second installments in the total amount of 13.75 million euros from the loan granted by the Government of Romania and
  • the impossibility of paying an external debt on time in the total amount of 14.5 million dollars, due to external factors that did not depend on the Republic of Moldova.

In this context, the audit mentions the need to monitor the situation created related to the impossibility of paying the external debt, to avoid incurring additional expenses from the state budget, as a result of the application by the external creditor of late payment penalties.

A major problem for the state budget is also the considerable balance of the debt of the banks in the process of insolvency towards the Ministry of Finance. Of the total debt taken over by the Ministry of Finance of 11.74 billion lei, as of 31.12.2023, from the capitalization of its assets, the banks returned only 2 billion lei, which constitutes only 15%, of which 63.5 million lei were returned in 2022.

The formation of considerable balances related to the debts of the guaranteed and recredited beneficiaries continues, which at the end of 2023 amounted to 481 million lei, of which 480.6 million lei are with an expired payment term, and respectively 11.5 billion lei, of which 0.3 billion lei are with an expired payment term.

At the same time, the audit highlights the situation in which 3 economic agents, based on the legal framework, were released from guaranteeing the repayment of loans recredited from external loans in a total amount of around 466.3 million euros, a situation in which the Ministry of Finance requires a greater monitoring of the risks related to the repayment of the respective loans within the stipulated terms and in full volume.

Based on the audit activities carried out, the Court of Accounts concluded that although the Ministry of Finance, in general, ensured the compliance of the management of the state debt, state guarantees and state recrediting in the year 2022, at the same time, the audit identified problems, which emphasize the need to strengthen the management of supervision and monitoring of the debt portfolio, interest rate risk and currency risk, to avoid additional financial risks for the state budget.

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