Monthly pays on right side of the Nistru are by 50% higher than on left side, expert

The most dramatic changes in labor remuneration in the Transnistrian region occurred during the past four years. In 2015, the average salary on the left side of the Nistru River was by 40% higher than on the right side. But the situation changed diametrically in 2019, when the pays were by 50% higher than on the left side, economist Veaceslav Ioniță, expert of the Institute for Development and Social Initiatives “Viitorul”, wrote on his blog that is quoted by IPN.

During 20 years with small exceptions, the average salary on both sides of the Nistru was at the same level. The situation started to change after 2013, when the so-called authorities of the Transnistrian region decided to artificially maintain the exchange rate. On the one hand, this improved the salary conditions of employees as the pay rose much faster than on the right side of the Nistru. But the artificial maintaining of the exchange rate in the Transnistrian region resulted in a negative value of the foreign exchange reserves at the start of 2016. Since 2016, the central bank of the Transnistrian region hasn’t published the data about the foreign exchange reserves, but informed that these continue to be negative.

According to the expert, the artificial maintaining of the exchange rate harshly affected exports that in five years declined by 1/3, from US$ 700 million in 2012 to US$ 530 million in 2016. In the period, we witnessed not only a reduction in exports, but also the taking out of capital from the Transnistrian region. The artificial maintaining of the exchange rate and the increased salaries in the region were covered at the expense of exporters. This made many take their capital out.

In 2016, after the central bank of the Transnistrian region used up the foreign exchange reserves, it had to reduce the value of the Transnistrian ruble that depreciated by 70% against the Moldovan leu in two years. This dramatic depreciation affected the people’s welfare and the salaries that, recalculated in lei, declined by 50% in two years. But this measure wasn’t sufficient and the Transnistrian central bank had to toughen up the currency policy in the region, obliging the business entities to sell a part of their currency revenues.

In 2019, in the absence of foreign exchange reserves, the central bank in Tiraspol took again the risky decision to maintain the exchange rate. On the one hand, this decision improved the labor remuneration situation in the region as the pays increased after a two-year dramatic fall. On the other hand, the increase affects the exporters that haven’t yet recovered after the previous artificial maintaining of the exchange rate.

“Most probably, the central bank of the Transnistrian region in 2020 will have to accept a slight depreciation of the local ruble, of at least 10-15%. The lesson is simple: populism does not last long and the people have to ultimately pay with their incomes for authorities’ populism,” stated the economist.

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