Moldova (bbabo.net), - Former Prime Minister Ion Chicu made a comment after yesterday's statement by the National Bank of Moldova to increase the cost of loans by another 2 points. transmits unimedia.info
"As expected, after the Prime Minister's attack, the National Bank raised the base rate by 2 percentage points, increasing it to 10.5%," Chicu notes.
He considers such a move inappropriate.
"If we evaluate which main products / services have risen in price the most over the past 12 months, we will see that for food products, our prices increased by 3.7% in January 2022 alone. How will the decision of the NBM on increase in the cost of loans?Will it decrease?Of course not, or the vast majority of people consume only bread and water, that is, basic necessities.
Consider another category - utilities, water, electricity, gas and fuel, prices of which rose by 4.86% in January 2022 alone. How can raising the base rate to 10.5% affect ANRE's decisions to raise gas, electricity or heat tariffs? No way. The same applies to other categories of goods and services that make a significant contribution to the inflationary boom - the dynamics of demand and prices for them does not depend much on the amount of liquidity in the market and the base rate set by the NBM," says Chicu.
He notes that the website of the European Central Bank indicates that core inflation is only about 1/3, and most of it comes from oil and food.
“That is why the European regulator decided to keep the base rate at zero, realizing that raising the base rate means additional trouble for the economy and consumers.
Thus, after raising the base rate to 10.5%, the NBM can be calm. They're fine, they're not to blame. However, the government may withdraw after this decision, or it will have the following consequences:
1. Increasing interest rates on new and existing loans to legal entities and individuals. And this means an additional burden on debtors. That is bankruptcy and poverty.
2. Stagnation and decline of the real estate and construction sector, with all the ensuing consequences.
3. A huge blow to farmers who are still in a difficult situation due to the sharp rise in fuel and fertilizer prices, and are forced to take out loans to provide for the spring season. At such rates, the use of agricultural loans is simply irrational.
4. The final destruction of local road construction companies.
5. All of the above consequences will lead to an increase in the cost of products and services and, indirectly, prices. I say this to the fact that the fight against prices will end with their increase ...
6. Additional expenditures from the state budget in the amount of several hundred million lei for servicing the domestic debt.
What to do in this situation:
1. Follow the example of the European Central Bank, which does not obey the "orders" of Ursula von der Leyen and keeps the base rate at zero. Even in the Eurozone, inflation is higher than expected. They are well aware of the consequences that we described above, they are well aware of what causes inflation, and they do not kill the economy, just to "do everything according to the instructions of the IMF."
2. Until July 1, 2022, follow the example of Hungary, Poland and other countries that have abolished/reduced VAT or capped prices for fuel and many other goods. Instead of spending hundreds of millions more lei from the budget to pay higher rates to banks for the placement of state securities, it is better to give up part of the income from sales tax.
3. Exemption during 2022 from VAT on natural gas. The additional burden on consumers of increased VAT as natural gas tariffs rise is enormous. The government is currently extorting about 4 times more gas-related VAT from consumers than last year.
4. The best weapon against inflation is economic growth, which in our current conditions can only be ensured by large investments in infrastructure," Chicu added.
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