Identifier
Created
Classification
Origin
08CHISINAU564
2008-05-30 13:03:00
CONFIDENTIAL
Embassy Chisinau
Cable title:  

NEW MOLDOVAN FINANCE MINISTER WANTS TO CUT SPENDING

Tags:  ECON PGOV PHUM MD 
pdf how-to read a cable
VZCZCXRO7144
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHCH #0564/01 1511303
ZNY CCCCC ZZH
P 301303Z MAY 08
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC PRIORITY 6718
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 CHISINAU 000564 

SIPDIS

STATE FOR EUR/UMB

E.O. 12958: DECL: 05/30/2018
TAGS: ECON PGOV PHUM MD
SUBJECT: NEW MOLDOVAN FINANCE MINISTER WANTS TO CUT SPENDING

REF: CHISINAU 369

Classified By: Ambassador Michael D. Kirby for reasons 1.4(b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 CHISINAU 000564

SIPDIS

STATE FOR EUR/UMB

E.O. 12958: DECL: 05/30/2018
TAGS: ECON PGOV PHUM MD
SUBJECT: NEW MOLDOVAN FINANCE MINISTER WANTS TO CUT SPENDING

REF: CHISINAU 369

Classified By: Ambassador Michael D. Kirby for reasons 1.4(b) and (d).


1. (C) SUMMARY: Moldova's new Finance Minister, Mariana
Durlesteanu, a reformer appointed by Prime Minister
Greceanii, faces the challenge of rising inflation and an
opaque budget process. A non-partisan technocrat, she wants
to balance the government's budget and rationalize
expenditures according to investment priorities. Durlesteanu
understands that in a pre-election period it will be
difficult for the ruling Party of Communists of Moldova
(PCRM) to approve spending cuts at the central and local
levels. She wants to create a national investment fund to
channel excess government revenues and privatization income
into productive investments. Her tenure may well serve as a
barometer of just how far Greceanii's economic reforms can go
before they crash into the PCRM's political goals. END
SUMMARY.

FROM LONDON TO CHISINAU
--------------


2. (SBU) On May 22, the Ambassador made his introductory call
on the new Minister of Finance, Mariana Durlesteanu, who was
previously Moldova's Ambassador to the United Kingdom
(reftel). A protege of Prime Minister Zinaida Greceanii, she
previously served at the Ministry of Finance as director of
the external debt department. Durlesteanu was open and frank
about the challenges the economy faces and her policy
recommendations, the likelihood of strong political
opposition in a pre-election year, and her re-adjustment to
life in Moldova.

MANAGING INFLATION
--------------


3. (C) Asked about growing inflation, Durlesteanu responded
that Moldova's inflation was driven by remittances (estimated
at USD 1.2 billion in 2007),growing investments in fixed
capital assets, and increased investments from the GOM. She
noted that inflation, especially rising food prices, was
discussed weekly at the GOM's cabinet meeting. On Fridays,
First Deputy Prime Minister and Minister of Economy Igor
Dodon chaired a brain-storming session with key Ministers to
discuss GOM policies which could alleviate the situation.
Durlesteanu noted that many of the factors contributing to

the increase in food prices were actually non-monetary
issues, such as low domestic productivity, policies which
limit market access, and monopolistic control on the local
market.


4. (C) On fiscal policy, Durlesteanu was pushing the GOM to
cut spending and balance the budget. She said that Prime
Minister Greceanii had informally approved this plan, but it
had yet to be adopted by the government. Durlesteanu was
very forthcoming about her recommendation that the GOM must
revise its priorities and cut spending in order to control
inflation. The Ambassador commented that the USG was
promoting reforms that would support sustainable budgets.


5. (C) Durlesteanu frankly noted the lack of order in the
local government budget process and the lack of technical
capacity at the local level. Durlesteanu commented that she
saw no rational planning at the raion level for local
expenditures. She told the Ambassador that upon assuming the
Ministry, she found Moldovan Lei 980 million (about USD 98
million) deposited in local government bank accounts. This
money should have been spent, but local leaders were holding
it to use for political gain later in the year. The
Ambassador noted his conversation with her predecessor and
the accusations by the opposition that funding was driven
more by political affiliation than actual need.

INVESTMENT FUND: GOM ANNOUNCES PRIVATIZATIONS
--------------


6. (SBU) Durlesteanu spoke extensively about creating a
national investment fund to channel excess government
revenues, donor assistance and the profits from planned
privatizations. Although the fund was still a concept,
Durlesteanu noted that the GOM would move forward with
"massive" privatizations in 2008. On May 22, Minister of
Economy Dodon announced that the GOM would auction government
shares in 40 joint stock companies in mid-June. He also
announced that in September, the GOM would sell all its
shares in the "Unic" central department store and "Tutun CTC"
tobacco factory on the Moldovan Stock Exchange. The GOM
expects to earn some USD 45-55 million alone from the sale of
these two companies.


CHISINAU 00000564 002 OF 002


COMMENT
--------------


7. (C) Durlesteanu is a non-partisan economic reformer loyal
to Greceanii. She's re-adjusting to life in Moldova after
her experience in London. It seems her time in the U.K. had
a positive impact on her views. She understands that
Parliament may not approve of her calls to cut spending prior
to a crucial national election, but she believes the GOM must
eliminate the budget deficit to help combat inflation. She
also wants local government budget reform, noting the lack of
transparency in the current process. Her views sound
positive to our ears, but it remains to be seen how far she
(and Prime Minister Greceanii) can continue to push these
economic changes prior to the national elections. President
Voronin and the PCRM need quick results (i.e. populist
measures) to appease the electorate.
KIRBY