Transition: retrospectives and perspectives
Chapter I. Socio-Economic Policies
The Budgetary-Fiscal Policy
Angela Casian, Andrei Petroia
The budgetary-fiscal policy of the Republic of Moldova is always in the public eye due to its importance as part of the economic policy of Moldova and its social visibility. The budgetary-fiscal policy is to reflect better than any other policy the interests of various social groups. Moldova's budgetary-fiscal policy has been an objective and organic part of the country's economic security and financial policy. As such, it has been a factor of major influence over economic processes, a tool for the promotion of financial resources and a power resource for the public authorities.
In 1991-1996 Moldova experienced a severe economic recession. A radical turn in the economic development of Moldova occurred in 1997, which saw modest growth in the industrial production of the country and marked the beginning of a period of economic recovery.
The 1998 Russian financial crisis affected the Moldovan economy in a dramatic way in that it blocked Moldovan exports of industrial and agricultural produce, and impacted negatively on Moldova's macroeconomic and budgetary indicators. However, the year 1998 saw the emergence of a positive trend of higher profit rates as compared to expenditure rates. Although as a result of this trend budget deficit dropped significantly in 1998, it did not entail a decrease in state domestic and external debt.
Since 1992 Moldova has been contracting large sums of loans from various financial bodies to cover its budget deficit and then to serve its external debt. The accumulation of loans led by 2001 to a technical default, which determined the then government to seek the restructuring of the public external debt. The state domestic debt has been on rise as well and its administration is currently an integral part of the country's budgetary-fiscal policy.
Hence the Moldovan budgetary-fiscal policy since 1991 was aimed principally at setting up a fiscal regime to multiply profits, including public ones, by sustaining a reasonable fiscal pressure; minimizing fiscal evasion by cutting off shadow economic activities; optimizing the structure of public spending to create new opportunities for social profits; and reducing non-authorized budget spending.
In conclusion, since 1991 the Republic of Moldova has been through all the stages of an economic cycle. The measures taken with regard to profit collection and funding state activity are testimony to a budgetary-fiscal policy that has not always been well-balanced and clearly defined. This has caused alternate ascensions and recessions at short intervals of time, a fact that, according to the author, is normal to happen in a transition economy.
As for recommendations for the future, the author states that apart from promoting a restraint in expenditures, Moldova's budgetary-fiscal policy is to pursue a systematic growth in the efficiency of spending. A number of measures to rationalize public spending and planning are imminent along with a relaxation of taxes. As for the policy on incomes, a rationalization of the fiscal regime along with a number of accompanying measures to that end is recommended. As important is to develop an integrated strategy of administration of the public debt.