Moldova (bbabo.net) - And all the discussions most often move to the political plane. The only thing that the opponents of the current government do not pay attention to is the age-old dilemma of choosing ways to develop and improve living standards. It is clear that there was no time to analyze the well-being of citizens separately and introduce targeted support for the executive branch, reports logos.press.md
But reacting in this way on a permanent basis, diverting huge budget funds, is also not the best way out, experts say. They insist on targeted and selective state support. Especially now, when legal entities are involved in its orbit, and the amount of compensation funds is increasing. Is it possible that wealthy enterprises will also be called upon to refuse compensation, as was naively done with respect to private consumers?
Recall, on January 31, Prime Minister Natalia Gavrilitsa announced that the government would compensate economic entities for the consumption of the first 500 cubic meters of gas. She clarified that the state has some funds for this, and the rest of the money will be allocated by amending the budget. Assistance measures were introduced retroactively and are valid from the beginning of the year. Obviously, such a development of events with a gradual increase in tariffs was calculated at the end of last year.
According to Minister of Economy Sergiu Gaibu, the corresponding assistance program covers more than ten thousand consumers of natural gas. A certain amount of financial assistance is intended for everyone, and more than half of legal entities will receive full compensation. This will require an additional 1 billion lei.
Many representatives of energy-intensive industries are not particularly enthusiastic about the compensation announced by the government for the first 500 cubic meters of natural gas consumed and say that they will hardly feel the help of the authorities. According to some, they use this amount in one day and therefore count on more substantial assistance. Others hope for an individual approach to the needs of large companies.
The largest bakery in the country, JSC Franzelutsa, reacted to the announced support from the authorities in the following way: “Government assistance in the form of compensation for the first 500 cubic meters of natural gas is good, but it will not save the situation much. The monthly consumption of the enterprise is 320,000 cubic meters. Maybe for small producers such compensation would be acceptable, but for us it is not. We are counting on other support methods that will offset the increased cost of production.”
A significant increase in the gas tariff could have been avoided in the case of a competent distribution of money from the country's budget, said former Prime Minister Ion Chicu. “Growth in gas prices leads to an increase in the price chain for all goods and services, and becomes the main driver of inflationary pressure. This growth outpaces the growth in incomes of the population, which ultimately leads to a reduction in purchasing power.”
Therefore, according to the ex-premier, it is necessary first of all to solve the "gas issue". He believes that it is quite difficult to postpone the increase in gas and electricity tariffs in the current circumstances. But such a measure would be worth it if thoughtfully applied. The difference in the price of a gigacalorie at the entrance to the country with the volumes consumed is approximately equal to the amount of compensation funds allocated to the population. (The package of compensatory measures for natural gas and thermal energy is estimated at 2.6 billion lei - note "LP".) It is not too late to cover this difference directly to the supplier and return the tariffs, Ion Chicu believes. And this is much better than starting the flywheel of inflation, which poses a much greater danger to the country's economy.
Nevertheless, the country's authorities still continue to fight against increased energy tariffs through compensation payments. Although Prime Minister Natalia Gavrilitsa has already stated that there are no plans to further increase compensation for the increase in gas tariffs. After the price of Russian gas doubled at the end of last year, the government decided to compensate for about 30% of the price difference. This support measure applies to consumption in the amount of 150 cubic meters per month, the consumption above this is paid by residents in full.
When announcing new measures to support citizens and businesses, the prime minister clarified that regardless of changes in purchase prices and tariffs for natural gas consumption, the previously established compensation mechanism will not change. The government has high hopes for energy efficiency projects, which it believes will support businesses and the public during the energy crisis.In addition, the head of the Cabinet focused on some cases of unreasonable growth in market prices, possibly dictated by a monopoly position or cartel agreements. In this regard, the Ministry of Economy and the Ministry of Finance are hastily considering the possibility of expanding the list of socially significant goods for which the trade allowance should be limited. The authorities intend to be more active in catching unscrupulous traders, uncovering collusion and punishing suppliers who abuse their dominant position in the markets for goods and services. Whether this will help keep prices down is still a big question.
Meanwhile, last year, when agreeing on the bill on compensation, two anti-corruption departments expressed their doubts about their expediency and recommended that it be revised. The National Anticorruption Center found that the draft law on compensation for natural gas and heat energy costs was not in line with state fiscal policy, while experts from the Center for Analysis and Prevention of Corruption argued that the document was discriminatory.
According to them, residents of non-gasified villages, users of electricity for heating and cooking will be disadvantaged, while owners of several properties, regardless of their financial situation, will receive compensation, both for natural gas and for heating each dwelling.
Experts from the Institute for Strategic Initiatives (IPIS) in the framework of the project "Socially Responsible Management of External Financing", in partnership with the Expert-Grup Independent Analytical Center, with the support of the Soros Foundation in Moldova, also expressed their opinion on state compensatory measures on aspects of social protection of vulnerable groups. They note that in total for the period from November 2021 to March 2022, the government allocated about 2.47 billion lei for compensation. Additional measures to support economic entities and measures to compensate for the cost of heating homes will require additional funds. According to experts, the cost of the entire package of measures for the designated period will increase to 3.1 billion lei, which is the most significant "social stuffing" in the history of the country.
Will it be effective? Being carried out in an extreme situation and in a short time, without correlation with the income of the beneficiary families, not very good, IPIS expert Victoria Olari believes. “According to the NBS, about 11.3% of Moldovan workers, or about 66,000 people, have a monthly income of more than 15,000 lei.
The exclusion of this category from the list of beneficiaries would save up to 120 million lei, the expert says. “This is money that could be used much more effectively to support the really poor people. Careful sampling is required. To this end, the government could use existing automated information systems managed by government agencies (State Tax Service, Public Services Agency, etc.) to create a fair algorithm for calculating and paying compensations.”
Another aspect that is less talked about during this period is the budgetary coverage of compensation, according to IPIS. It is important to understand that the financial resources allocated from the state budget to compensate for the increase in gas tariffs will not be enough for other important areas that require allocations and investments. The Republic of Moldova is among the European countries most affected by the COVID-19 pandemic. Under the influence of the pandemic and severe drought, the national economy sank heavily in 2020.
It gradually began to recover last year, but most short-term indicators remain in the negative zone. The government needs to adopt a more inclusive and sustainable way of development, the authors of the study note.
Rational management of the state budget should be aimed at restoring the sustainability of economic growth. Additional funds would find their use as support for reforms in all areas of the national economy, infrastructure investments.
Compensatory policy does not fit well with the inflationary leveling of the incomes of the country's citizens, especially the poorest strata. Rising food prices will hit people with low incomes first. Those who give 80% of the family budget for food and utility bills, the price increase is most acutely felt.
As a result, middle-income people are at risk of falling closer to the poverty line. And then the issue of targeting the compensatory support of the state will have to be taken much more seriously both in organizational and cost terms, experts say.
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