Position Paper: Guaranteeing Loans of State Enterprises and State-Owned Companies: How Do We Avoid Budget Risks?

Pressure on the state budget has increased substantially since last year, as payment obligations arose from state guarantees issued by the Ministry of Finance for emergency loans granted by the National Bank of Moldova to the banking system. This exposed threats to the sustainability of public finances through additional fiscal exposures and a long-term burden, making public sector debt management vital.

Past practice showed an inefficient use of the instrument, resulting in an unjustified budgetary burden and irrational spending. Such loans in effect became indirect budget financing for entities, including state-owned ones. Although the instrument is practically no longer used, the law still allows the Government to grant guarantees, which poses quasi-fiscal risks. These are fuelled by the entities' current deficiencies and frequent political interference, and must be anticipated in managing state debt. The publication was funded by the British Embassy Chișinău through the Good Governance Fund.