08 02/2017

Moldovan government adopts rectification of state budget for 2017

The Cabinet approved the rectification of the State Budget Law for 2017 at its today meeting. The document assumes increases of 385.9 million lei in revenues and expenditures of the general consolidated budget. The changes do not affect the estimated budget deficit, the government’s communication and protocol department has reported. 

The most important changes concern the increase in transfers from the state budget to local budgets and allocation to this part of the road fund. So, the allocations to the Ministry of Transports and Road Infrastructure were reduced by 350.3 million lei, the amount due to be transferred to the local authorities’ level two for road management at district level. Similarly, the transfers to local budgets of first level are increased by 385.9 million lei, following the exclusion of the Law on Local Public Finance breakdowns from the road use tax by vehicles registered in the Moldova. The amount is provided in the revenues of the state budget.

Amending budget document also requires creation of a reserve of cash in the amount of 2 billion lei. In essence, this reservation does not involve additional cost and is designed to reduce potential risks arising from the unpredictability of the domestic financial market, namely the risk of refinancing debt and improve, per general public sector debt profile. But liquidity reserve can not be used to finance the budget deficit, allowing for exceptional circumstances only.

The cash buffer is used in countries such as, Romania, Hungary, Turkey. Creating such a reserve in Moldova was discussed with the development partners, in particular IMF, and is regarded as a tool for strengthening macro – fiscal stability.

The Draft Law on State Budget 2017 correction is to be submitted to Parliament for consideration.