Public debate: Budgetary-fiscal policy and budget for 2023: form and content in approach

Narrative report
on the organization of the debate ”
Budgetary-fiscal policy and budget for 2023: form and content in approach. Debates series held by the news agency IPN in its conference room with the support of the German Foundation “Hanns Seidel”

Held on 19 December 2022, Debate No. 270 brought together: Veronica Sirețeanu, deputy director for advocacy and business development at the American Chamber of Commerce in Moldova, Alexandru Fală, program director at the Independent Think Tank “Expert-Grup”, and Igor Boțan, IPN project’s standing expert.

The permanent expert of IPN’s project Igor Boțan said that in accordance with the law on public finances and budgetary-fiscal responsibilities, the national public budget of the Republic of Moldova includes the state budget, the state social insurance budget, the mandatory health insurance funds and the local budgets. “The state budget of the Republic of Moldova is the main component of the budgetary system. From legal viewpoint, the state budget is defined as the document specifying the probable incomes and costs of the state for a period of a year. From economic viewpoint, the state budget expresses the economic relations that appear in the process of distributing the Gross Domestic Product with regard to the fulfillment of state duties,” noted the expert.

According to him, these relations have a double sense - as relations through which financial resources are collected for the state and also as relations through which these resources are distributed. From material viewpoint, the state budget can be defined as a centralized fund of collected incomes made available to the state for covering the incurred costs. “This way, the state budget represents all the incomes, costs and sources of financing for fulfilling the duties of the central public authorities, except for duties typical of the public social insurance system and the mandatory health insurance system, and for establishing relations with other budgets. The state budget is managed by the Ministry of Finance, which is responsible for drawing up the budget with the contribution of the responsible ministries and other institutions,” explained Igor Boțan.

He noted that the budgetary-fiscal policy is a set of measures to form, manage and use the budgetary resources for implementing the economic and social policy priorities. The budgetary-fiscal policy is a form of state intervention in the economy, on the goods and services market, with the state intervening primarily to adjust the internal macroeconomic imbalances. “This policy to manage the imbalances is aimed at ensuring macroeconomic stabilization by distributing the taxes and, respectively, government costs. So, the budgetary-fiscal policy by its measures aims to stimulate economic activities, investments and insurance of social protection,” stated Igor Boțan.

Veronica Sirețeanu, deputy director for advocacy and business development at the American Chamber of Commerce in Moldova, said the draft state budget should have reached Parliament in July for being discussed and adopted, as should have been the draft budgetary-policy document as a period of half a year is needed for the amendments to the Fiscal Code and the Customs Code to take effect. This period was envisioned for the authorities and the business community to adjust to new realities, especially if they come with radical and complex changes. But this period is usually not obeyed and derogation is made from this norm, while the drafts are adopted in December.

“The framework related to the budgetary-fiscal policy, to the budget law is in essence an exercise called the medium-term budgetary framework (MTBF). This is a predictable framework designed for a three-year period and is adjusted annually so that all the players, all those involved in this process – on behalf of the government, the nongovernmental sector or the business community – know will happen during the next three years, more or less. These are basic concepts related to the incomes and costs. We didn’t have an active exercise to discuss the MTBF this year. We presume this is due to the war in the neighborhood that started in February. The first request to present proposals for the fiscal policy was made in July. On November 11, we already received the Government’s draft,” stated Veronica Sirețeanu.

According to her, the legislation provides that the budgetary-fiscal policy is designed when particular realities change, but this is not a mandatory document. There are multiple countries that do not approve the budgetary-fiscal policy annually, as the Republic of Moldova does. “For the business community, the delay with which the budgetary-fiscal policy is adopted generates panic. The policy came with a big delay, but we must say that in the discussions, particular initial comments made by the business community over the first draft were taken into account,” said Veronica Sirețeanu.

Alexandru Fală, program director at the Independent Think Tank “Expert-Grup”, said the delays in the budgetary calendar became rather a norm in the Republic of Moldova in the times of the previous governments. Different explanations can be found, but these delays in the future should be as short as possible.

“In the course of the year, primarily in summer, there were formulated a number of broad fiscal policy ideas. The common tax for small enterprises was discussed a lot. It was proposed reintroducing the zero profit tax rate. A lot was discussed and in summer it wasn’t clear what proposals concerning the fiscal policy the government will formulate. We are indeed in a situation of war that is much more uncertain and the goal was to come up with particular measures that would satisfy everyone. I don’t know at least one case when everyone was satisfied and it will probably be so permanently as the budget is limited in any country and this aspect is much more specific for the Republic of Moldova, which has a relatively tight budget and it is rather hard for it to do broader reforms,” stated the expert.

Alexandru Fală considers that in such conditions, it is difficult to implement stimulatory fiscal policies. “This would mean large tax cuts, but it is rather hard to do something like this. Concomitantly, it is rather hard to promote budgetary policies with higher costs. In 2023, we will have to incur large budget costs. The government tried to come up with stimulatory measures, including in the fiscal area. Evidently, there are aspects with which the business community does not agree, but there are particular measures that are stimulatory in character,” he stated.

The Agency published 4 news stories on the debate (see the English version of on 19.12.22, „Budgetary-fiscal policy and budget for 2023: form and content in approach. IPN debate”;; “Alexandru Fală: Human capital crisis in public sector is main constraint on Moldova’s development”;; Veronica Sirețeanu: Budgetary-fiscal policy should be presented without delay or panic is created”;-; „Igor Boțan: Government will be helped if it fulfills commitments”;

Valeriu Vasilica, director of IPN

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