Expert Viorel Gîrbu on the 7% base rate: “It is an error; the NBM is hitting the economy”
Economic expert Viorel Gîrbu argues that the National Bank of Moldova's (BNM) decision to raise the base interest rate to 7% is a mistake that will negatively impact both the population and the business environment. He explains that inflationary pressures are mainly driven by external factors, and that tightening monetary policy will not effectively address the issue.
“It is an error. When inflationary factors originate outside the national economy, the National Bank cannot effectively address inflation, unless it significantly worsens the situation within the national economy,” stated the expert during the “Zi de Zi” show on Radio Moldova.
According to Gîrbu, the primary driver of price increases is developments in the international energy markets.
“Inflation is largely influenced by oil and fuel prices, and our only option is to invest more in the national economy to enhance the efficiency of economic activities and to find alternatives to fossil resources,” he explained.
However, the National Bank of Moldova (NBM) is acting contrary to this need by limiting access to financing at a time when the economy requires more investment.
“The National Bank is creating obstacles for the economy to adapt to the crisis. This decision is imposing pressure on the business environment and society,” the expert said.
He cautioned that the consequences will be directly felt by citizens, especially those who have taken out loans or plan to do so.
“Everyone who has taken out loans will have to pay more, and those seeking new loans will face higher interest rates and fees. As a result, they will have less disposable income for consumption and other expenses,” explained Viorel Gîrbu.
The expert also referred to the period from 2022 to 2023 when the National Bank of Moldova (NBM) adopted similar measures.
“The economy is still struggling to recover from the shock caused by the National Bank. The institution is repeating mistakes from the past and is negatively impacting the economy, which is already stagnating,” he stated.
In his view, the negative effects extend beyond the economic realm.
“By damaging the economy, the National Bank is also affecting society, political stability, and even the prospects for European integration in the Republic of Moldova, as citizens become disillusioned with these policies,” the expert explained.
Viorel Gîrbu emphasized that the state should prioritize reducing the budget deficit, which he identifies as a primary internal source of inflationary pressures.
“The Ministry of Finance must work to reduce the massive budget deficit. This deficit exerts significant pressure on inflation and affects the management of public finances in the Republic of Moldova,” the expert pointed out.
On Thursday, June 18, the National Bank of Moldova raised the base rate for its main short-term monetary policy operations to 7%, up from the previous 6.5%.
Interest rates on overnight loans were set at 9% annually, those on repo operations at 7.25% annually, and on overnight deposits at 5% annually, all of which represent increases from current values.
Meanwhile, the required reserve norms remained unchanged: 18% for funds attracted in Moldovan lei and non-convertible currency, and 26% for those in freely convertible currency.
The NBM explained this decision by citing intensifying inflationary pressures, driven by rising international prices for energy, food, and raw materials, as well as by increased domestic consumption supported by household incomes.
According to the institution, its main objective is to bring inflation back to around the 5% target, with a permissible range of ±1.5 percentage points. As of May, inflation stood at 6.76%.
