I spent last week in #Moldova, uncertainty and fragility are two key words which describe the current situation. Below are some insights based on conversations & observations during my stay. 1/19
Government installed last August run the country more in emergency (state of emergency in healthcare, energy sector & now cause of Russia’s aggression against Ukraine) than in normal mode. Emergency is the new normal & probably to stay here for some time. 2/19
Cascade of emergencies compelled gov to channel admin and financ res to deal with crises and minimize impact on citizens. In the process executive burned resources initially aimed for ec dev & modernz. There is hope that these could be replenished with donors’ assistance. 3/19
But more loans is not optimal solution, it raises issue of debt sustainability & in the perspective makes MD more fragile (servicing debt will be absorbing res for dev). What can make the difference is bigger macro fin assistance (with grants taking precedence over loans). 4/19
Of particular help will be fin assist to finance 700 proj submitted by loc auth. Gov set up fund to finance such type of proj; but the sum put aside is unlikely to be sufficient. Decentral of assist & sustaining changes on the loc level can produce powerful positive effects. 5/19
Crises overstretched limited capacity of state bureaucratic machine. To fill 2nd questionnaire re MD’s appl for the EU mem, gov relied on support of CSO, diaspora & exp from RO. To speed up ref MD urgently needs to beef up its adm capacity & donors could play important role. 6/19
MD soc feels the impact of war. One can see on the roads more cars with UA regist plates & hear on the streets UA language or RU spoken with different accent. Ppl accommodate refugees (90% hosted by private sector & volunteers), talk to them and what they hear feeds anxiety. 7/19
Ppl watch news and some, especially those living not far from the border with UA, hear echoes of explosions. Surveys in MD show that fear of war tops the list of pub’s concerns; a jump from 10% to 59.4%. In the first weeks of war some preferred to reallocate families to RO. 8/19
Popul feels ec impact of the Russian aggression. After the war, prices come at 2nd place among main concerns; inflat reached 22% in MD, among the highest in Europe. There are two drivers behind it: growing energy prices and higher import costs (as Odesa is under blockade). 9/19
They will feel it even more as the economy after impressive 13.9% growth in 2021 goes to a standstill in 2022, 0.3% according to IMF; other estimates point out to at least minus 5% this year. 10/19
Energy sector remains MD’s Achilles' heel. It covers 80% of energy needs via imports from TN (RU controlled Cuciurgan power stat). In spring Cuciurgan planned to hike significantly energy prices; Kremlin probably aimed to reenforce infaltionary effects. 11/19
Through give and take negotiations (Transnistria relies fully on Moldova-proper for imports, effect of Odesa blockade), Chisinau managed to minimize increase of price but secured extension of the contract only for one month. 12/19
Ukraine is an alternative; Moldova recently concluded contract with Ukrhidroenergo which will cover 30% of needs. Still due to ongoing war, deliveries any moment can be disrupted if the critical unfractured is damaged by Russian missiles. 13/19
Romania would be an alternative too. But due to insufficient interconnection (low voltage line), Romania technically cannot cover all Moldova’s energy needs. The work on high voltage interconnection shall be finalized in 3 years. 14/19
With gas deliv sit is slightly different. There are better interconnections. If RU decides to cut out gas deliveries (still big question what will happen to TN in this case), MD can buy/import gas from altern sources. The problem with gas for MD is its prohibitive price. 15/19
Without securing gas deliveries at discount price and building some reserves for cold season, Moldova is unlikely to stomach current high prices and survive the next winter. In this regard, assistance of international partners will be critical in the coming months. 16/19
Rising inflat, ec slow down and energy shortages form powerful destabilization cocktail. RU pol proxies in MD are set to exploit ec hardship. Instead of pushing for land corridor to TN (improbable for now mission), RU probably will seek to implode MD from inside. 17/19
The stakes in Moldova are high. Ramifications of political and economic destabilization will transcend its borders; security situation will worsen for Ukraine (its southern regions) & Romania. It also will be a blow for the EU’s transformative power in the region. 18/19
To avert internal negative scenario in Moldova, international partners may come up with a comprehensive resilience package which will help to address vulnerabilities highlighted above and render Russia’s destabilizing tactics ineffective. /end/
Correction/update: inflation in Moldova surpassed 27%. Central Bank projects inflation to hit 31% this year.
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Last time #Transnistria made to the headlines was when Sheriff Tiraspol defeated Real Madrid. This time around it is not #championsleague which catapults Transnistria in, but geopolitics. Let me weigh in as the news about imminent escalation of the conflict multiply. 1/38
For years Russia used Transnistria as a multipurpose vehicle against Moldova. 1st, building image of more viable and prosperous entity than MD proper. In the past it was not rare to hear on the right bank talk abt cheap household heating & higher pensions in Transnistria. 2/38
Transnistria was also supposed to be an example - the closer one sticks to Russia, the better one lives. Over the last years, “Transnistrian model” lost the lustre. Chisinau report since 2017 increasing number of ppl from Transnistria applying for pension in Moldova proper. 3/38