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Activity of the Government on August 4–17, 2003

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Foreign funding

In a statement made on 15 August 2003 Prime Minister Tarlev said that the recovery of relations of co-operation with the international financial bodies is the priority of the Republic of Moldova, one on which depends Moldova’s overall capacity of overcoming the current economic crisis. Rightly so, for this statement reflects perfectly well the seriousness of the situation in which the Moldovan Government found itself after the IMF and the World Bank had successively withdrawn funding to Moldova worth about US$30 million as a result of the lack of consistency in Moldova’s economic policies and its failure to meet the requirements for funding. The withdrawal of funding has put under question the restructuring of Moldova’s foreign loans worth about US$200 million through the Paris Club and created a considerable gap in the budget once the non-reimbursable donations, provided for in the budget, are no longer available. And since the revenues to the budget, and hence the expenditure, will have to be cut down, the government will not be able to sustain financially a number of its projects, including the ongoing territorial administrative reform and the strategy for economic growth and poverty reduction.

Under these circumstances, the Government will draft, with the help of the IMF consultants, a number of action plans to cover the budget deficit that will soon emerge. A number of scenarios will be considered, including the one where the Government will not be able to secure alternative non-refundable funds and will fail to negotiate a postponement of its foreign debt payments. Analysts have indicated that in this latter case the Government will have to either give up a series of internal social and economic programmes, for which it now lacks funds, or turn to the National Bank of Moldova (NBM). The NBM currency reserves will be indispensable for restructuring the foreign debt when there are no preferential foreign loans. At the same time, the exhaustion of the NBM reserves will raise the risk of devaluation of the national currency and uncontrolled price rises, which, according to analysts, might result in yet another economic crisis with serious social and political consequences.

It was probably this sort of reasons that have made Prime Minister Tarlev to call upon the Finance Ministry to identify “real sources of funding the budget expenditure” and draft a budget that is “well-balanced, has sure revenues and prioritises expenditures” for 2004, whose draft the ministry is to submit by 25 August 2003.

Dialogue with the trade unions

An additional reason for concern for the Moldovan Government under the current circumstances are the demands of the trade unions, in particular the ones related to raising the salaries of public employees. Recently, the Government has announced a 15% raise of public employees’ salaries, as provided in the 2003 budget, starting 1 September 2003. At the same time, the Confederation of Trade Unions of Moldova has been demanding since May 2003 a doubling of salaries, and has threatened with mass strikes and street protests should the Government fail to meet this demand.

Since the negotiation round on 1 August 2003 between the Government and the trade unions produced no compromise, the talks on the subject continued during the meeting of the Republican Tripartite Commission for Collective Negotiations (Government-Unions-Employers) on 7 August. Although this time the unions made certain concessions and demanded a raise of only 50%, which they deemed acceptable both to the Government and to the unions, the Government maintained the 15% threshold and suggested in exchange to the unions to be more assertive with the employers when it comes to paying salaries on time and thus help avoid salary arrears.

In reply, the Confederation of Unions sent the Government an official letter in which it urges the signature of an Agreement by 20 August 2003, that is to include a number of concrete measures towards finding a solution to the issue of raising salaries. The unions have proposed a 50% raise as of 1 September 2003, the payoff of all salary arrears in the public institutions and in the production sphere by 1 September and 1 October 2003 correspondingly, and the drafting and adoption of the law on the system of determining salaries in public institutions.

According to the unions, these measures are absolutely necessary given that in July 2003 the fees for electricity and gas were raised and the inflation has hit 40%. In addition, the average salary of public employees is currently 662 lei (around US$50), which is only 60% of the value of the minimum consumption budget. As a result, most of the public sphere employees live under the poverty threshold.

In the event that the Government accepts to sign the Agreement proposed by the unions and respects its provisions, the unions will not revert to the protest actions that they have announced earlier. In the meantime, the union of health system employees has already instructed its field offices to prepare the employees for strikes as a sign of protest against Government’s failure to raise salaries.

Personnel changes

Through a presidential decree of 5 August 2003, Marian Lupu, Deputy Minister of Economy, was appointed Minister of Economy, and Valentin Beniuc, Chancellor of the Academy of Diplomatic Studies and International Relations, was appointed Minister of Education.

Marian Lupu is 37 years old, holds a PhD in Economics from the Academy Plehanov in Moscow, and has served as a trainee at IMF and the WTO. Since 1991 he has held various positions at the Ministry of Economy, and since 2001 he has been Deputy Minister of Economy. He is known as a reform-minded economist holding pro-western views.

Valentin Beniuc is 47 years old, holds a PhD in History and his career has been mainly academic. Between 2000 and 2003 he was Chancellor of two higher education institutions. Beniuc was appointed Government representative to the Council of Observers of the Public Institutions “Teleradio Moldova”, whose chairperson he was elected later.

Administrative

The Government has created, under the Ministry of Foreign Affairs (MFA), the Department for European Integration, by merging three relevant institutions from the MFA and the Ministry of Economy. The Department will be run ex officio by Andrei Stratan, First Deputy Minister of Foreign Affairs. The Department will have 29 employees and three directorates: one working on the political relations between Moldova and the EU, one working on the economic relations between the two, and a National Bureau of the Stability Pact. The Department will be responsible for the implementation of the strategy of European integration of Moldova and the government policy in the field, it will see to the compatibility of programmes and policies of the Moldovan government with the objectives of European integration and regional co-operation in South-Eastern Europe, as well as deal with issues related to the financial assistance that Moldova receives from the EU. The institution of this specialised body has been described by the Moldovan government officials as a positive step that would facilitate considerably the process of Moldova’s integration into the EU.

The Government also approved the Regulation for the Activity of the State Department for Migration. The Department will take over the functions and personnel of the Principal Division for Refugees under the Justice Ministry, the functions of issue of invitations to foreign and stateless citizens upon the request of legal persons, and the ones of issue of invitations upon the request of physical persons. The Department will also deal with the extension of entry visas and the issue of entry visas and temporary and permanent leaves to stay to foreign and stateless citizens.

July 21 – August 3, 2003 August 18 – September 7, 2003