5 Myths About External Debt
Automatically translated summary. The full text is available in Romanian.
After donor conferences in Berlin in April 2022 and Bucharest in July, public concern grew over Moldova's capacity to take on new external debt. Independent Think Tank “Expert-Grup” examines whether such fears are justified and debunks the main unfounded perceptions, offering recommendations for the Government and creditors.
The analysis shows that public external debt was 2,678 million USD (MDL 49,064 million) on 31 March 2022, or 19% of GDP against a 55% limit, and 57% of annual exports against a 240% limit. Total public debt was 33% of GDP, and the IMF projects 38% in 2022 and 41% in 2023. Because short-term securities create interest-rate and refinancing risks, the Government should rely more on long-term external financing.
Servicing external debt is not costly: the average implicit interest rate was 1.2-1.6%, below economic growth and commercial bank rates of 4-5%. Servicing takes 5-6% of budget revenues (critical level 23%). Nor is the public sector the main source of external debt: it accounts for 30%, while the private sector owes 6.3 billion USD, 31% of it intragroup lending.
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