Moldova's external debt rises over $10 billion, experts weigh in
In the past two years, Moldova's external public debt has increased by over one billion dollars, bringing the total to more than 10 billion, according to data from the National Bank.
The majority of this increase is due to state loans. While the opposition accuses the government of excessive borrowing and transferring the financial burden onto citizens, the authorities argue that the funds are being directed toward development and reforms. Economic experts consulted by Teleradio-Moldova assure that the current debt level remains sustainable and does not threaten the country's financial stability.
Moldova's total external debt has risen consistently from 9.57 billion dollars in 2022 to over 10.21 billion in the third quarter of 2024, according to the latest data published by the National Bank. This increase is primarily driven by the rise in public external debt, i.e., loans contracted by central and local government authorities.
The evolution of public external debt shows a significant increase in just two years, from 3.17 billion dollars in 2022 to an estimated 4.23 billion in 2024. This represents a rise of approximately 1.06 billion dollars, equivalent to an increase of more than 33%.
Regarding the total external debt, the figures indicate an increase of 638 million dollars during the same period, or a rise of 6.6%. The share of public debt in the total external debt increased to 41% in 2024.
The rise in Moldova's external debt in recent years is not a cause for alarm, but should be viewed in the context of the evolution of the national economy and financing costs, asserts economic expert Marina Soloviova. According to her, the current level of external debt, in relation to GDP, is moderate and below the limits considered risky by the International Monetary Fund.
"In absolute terms, in dollars, Moldova's total external debt has increased by approximately one percent compared to last year. However, when comparing external debt to the size of the economy, i.e., to GDP, it has actually decreased, as at the end of 2023, the total external debt was about 60% of GDP, while at the end of 2024, it stood at 56% of GDP, meaning it decreased by 4 percentage points," Soloviova explained.
The increase in public external debt, by about one billion dollars in the last two years, is also explained by the state's strategy to secure external loans under favorable conditions. Soloviova suggests that external loans are significantly cheaper than those on the domestic market, where interest rates on government securities are around 9%. "The average interest rate on external loans in 2023 was just 2.5%. It makes sense for the state to borrow from abroad, especially under concessional terms. Moreover, even though public debt has increased, the ratio of public debt to GDP has only risen by one percentage point – from 23% to 24%," the expert explained.
According to the criteria set by the IMF and the World Bank, Moldova is far from reaching the alert thresholds for indebtedness. The limit for external public debt is 45% of GDP, and at the end of 2024, Moldova's level stood at 24%, i.e., half of that. Regarding the external debt service—i.e., repayment of loans and interest payments—the expert points out that the limit is 22% of merchandise and services exports, while Moldova recorded only 8% last year.
However, Soloviova emphasizes the importance of the purpose of the borrowed funds, not the volume of the loans themselves: "In general, it would be ideal if loans were spent on productive purposes, meaning they should generate economic growth greater than the interest rate. For example, if the average interest rate on external loans last year was 2.5%, we should have economic growth exceeding 2.5% to service the debt without much difficulty."
In the context of the European Commission preparing to grant Moldova loans and grants totaling around 1.9 billion euros, Soloviova argues that the money should be invested in energy infrastructure, research, education, workforce retraining, public administration modernization, and road infrastructure.
The issue of public debt is often brought to the public's attention by opposition parties, both parliamentary and non-parliamentary. They accuse the government of excessively borrowing for Moldova and claim that, ultimately, the burden of these loans will fall on citizens.
In the opposition's view, the rapid growth of public debt is alarming and would be the result of a government increasingly relying on external and internal loans to support social and investment programs. Representatives of the Bloc of Communists and Socialists denounce the so-called “Budget +PLUS.” "Now, with just a few months before the elections, the government presents the largest investment package of 8 billion, pompously called Budget Plus. For roads, farmers, infrastructure. Where is the money coming from? It seems to be loans, debts that you will put on citizens," declared BCS deputy Bogdan Țîrdea during Monday’s parliamentary session, when changes to the state budget were approved.
Prime Minister Dorin Recean rejects these accusations. According to the head of the Cabinet, Moldova's debt level is low compared to other countries in the region, and the loans are justified if the money is invested responsibly: "Moldova is the country with practically the lowest public debt in the region. The problem is not the debt, but how we invest the money—in infrastructure, in the economy—so we can ensure development. There is no problem in borrowing, the important thing is to do it responsibly."
Political and economic analyst Victor Ciobanu also rejects the rhetoric suggesting that external debt poses a serious problem for Moldova. He believes that the opposition frequently raises this issue in the public sphere without offering alternative solutions. "This issue has been raised regularly by all opposition parties, as far as I remember, about external debt, which is not critical for Moldova." According to Ciobanu, many European countries have external debts exceeding 100% of GDP without it being considered alarming.
"The opposition uses these topics out of a lack of imagination and concrete economic proposals (...). They keep returning to the same debt, which is an outdated topic and does not represent any threat to Moldova's economy," said the analyst.
Ciobanu believes that the public debate should focus more on how the borrowed money is spent, not on the existence of the loans themselves. In his view, the opposition should present clear proposals for economic development, especially in the context of European Union support.
Translation by Iurie Tataru
